Since July, significant shifts have occurred in the Middle East situation and the crude oil market. The US-Iran conflict has escalated again, disrupting tanker traffic through the Strait of Hormuz and intensifying geopolitical concerns. Simultaneously, the Houthi group has announced the implementation of a maritime blockade against Saudi Arabia, in addition to military strikes, which has obstructed Saudi Arabia's westward crude oil exports.

The renewed escalation of tensions in the Middle East, combined with transport disruptions in the Strait of Hormuz and the Bab el-Mandeb Strait, has led to a sharp tightening of short-term crude oil supply. Supported by bullish factors, crude oil prices have stabilized and rebounded continuously since early July.

Overall, the current situation in the Strait of Hormuz presents two key trends: on one hand, the US-imposed maritime blockade only targets Iranian vessels; on the other hand, Iran maintains control over the Strait while continuing to keep specific navigation routes open. Currently, Iran's demand is a temporary suspension of ships using the southern route of the Strait of Hormuz, and in exchange, it has proposed a new route. In other words, Iran has added one route alongside the northern route of the Strait. However, given the high level of geopolitical risk in the Middle East, shipping companies are reluctant to venture through, leading to a significant decline in traffic volume through the Strait. According to shipping data, following the escalation of the US-Iran conflict, the volume of crude oil shipments through the Strait has seen a noticeable drop, essentially returning to the level seen in early March.

During the sustained rise in crude oil prices, market sentiment has also undergone a round of adjustment. In June, the crude oil market was characterized by short-side dominance and a lack of long positions, but a reversal occurred in July, shifting sentiment to long-side dominance and an absence of shorts. After completing this adjustment, sentiment moved to another extreme, setting the stage for a market correction.

Since the end of last week, the US and Iran have entered a temporary ceasefire, with news of negotiations continuously emerging. Overall, after nearly three weeks of intense mutual attacks, the US-Iran situation has somewhat cooled, and geopolitical concerns have notably improved. On July 27, crude oil prices fell sharply, unwinding the geopolitical risk premium. However, uncertainty in the Middle East geopolitical situation has not yet been resolved: the US and Iran have not resumed negotiations, and more critically, the Strait of Hormuz has not restored effective navigation. In the near term, close attention must be paid to developments in the situation.

The chart shows the crude oil shipping volume through the Strait of Hormuz.

In July, the sustained rebound in crude oil prices, both in terms of driving logic and market volume and price action, can almost be seen as a mirror image of the June trend. In June, crude oil prices fell continuously, with the market pricing in a scenario of a US-Iran ceasefire, the resumption of Strait of Hormuz navigation, a market entering a state of oversupply, and an element of forward pricing. During this process, shorts dominated the market, and longs were absent, pushing sentiment into an extreme situation. In such extreme conditions, adjustments to crude oil market sentiment typically occur through one of two paths: either the market enters a period of sideways consolidation, absorbing the imbalance over time, or a sudden event forcibly reverses the short-long dynamic. As it turned out, the imbalance in sentiment structure from June was ultimately corrected through the second path, even swinging to the opposite extreme.

After recovering nearly all of June's losses, crude oil prices still carry a risk premium, and the imbalance in sentiment structure faces a need for correction. The key focus now is whether there will be further sudden events that drive crude oil prices and sentiment to reverse course. Investors must closely monitor the evolution of the US-Iran situation and the navigation status of the Strait of Hormuz.

Sina's cooperative large platform offers futures account opening, ensuring safety and convenience.