Oil Jumps 3% as Hormuz Uncertainty Returns Ahead of U.S. CPI

Oil prices rose more than 3% on Monday and extended their gains later in the session as hopes for a quick reopening of the Strait of Hormuz faded, putting energy prices back at the center of the inflation debate just two days before the next U.S. consumer-price report.

Brent crude was up 3.1% at $86.11 a barrel during U.S. trading, while West Texas Intermediate climbed 3.3% to $80.73. The rally strengthened as the session progressed, with Brent later trading above $87 and WTI above $81, gains of more than 4% from Friday’s levels.

The move reversed part of the previous week’s decline, when traders had grown more optimistic that negotiations involving Iran and Oman could lead to greater shipping traffic through Hormuz. That optimism weakened over the weekend after Tehran said an agreement with Oman would not, by itself, be enough to fully reopen the waterway.

Iran has linked a broader reopening to demands that include sanctions relief, compensation from the United States and an end to what Tehran describes as hostile U.S. military actions. President Donald Trump has also demanded compensation for U.S. casualties and damage attributed to Iran. Reuters reported Monday that no direct U.S.-Iran negotiations were under way, leaving a substantial gap between the two sides even as Oman continued diplomatic efforts.

That uncertainty matters far beyond the daily move in crude futures. The Strait of Hormuz has been one of the biggest forces shaping oil markets in 2026. Shipping through the waterway was effectively halted after the U.S.-Iran conflict began on February 28, forcing several major Middle Eastern producers to shut in millions of barrels of daily production. A June 18 memorandum of understanding between Washington and Tehran subsequently allowed traffic to begin recovering, prompting the U.S. Energy Information Administration to assume that oil production and trade flows would gradually move back toward pre-conflict levels.

Monday’s price jump shows how fragile that assumption remains.

The market had started pricing in a more normal oil supply picture

The easing of the Hormuz disruption had already produced a major change in the oil outlook.

Brent averaged $107 a barrel in May as constrained shipping and production shortages tightened the market, according to the EIA. By June, the average had fallen to $85 as expectations grew that the strait would reopen and shut-in production would return.

The price swings inside the second quarter were even more pronounced. Front-month Brent futures traded as high as $118 a barrel on April 29 before falling to $72 on June 26, illustrating how quickly the market repriced the risk of prolonged supply disruption as diplomatic developments changed.

In its July Short-Term Energy Outlook, the EIA cut its forecast for average Brent prices in the third quarter to $74 a barrel and projected that worldwide crude-oil production and trade flows would return to near pre-conflict levels by the end of the year. Most previously shut-in Middle Eastern production was expected to return by the first quarter of 2027.

That outlook assumed continued improvement in shipping through Hormuz.

If the political conditions for reopening become harder to satisfy, the path back to normal production could take longer than the EIA anticipated in July. Monday’s move does not prove that such a delay will occur, but it shows that traders are again demanding a larger geopolitical premium while the timetable remains unclear.

The supply disruption earlier this year was large enough to reshape energy trade. At the height of the crisis, the EIA estimated that more than 11 million barrels a day of Middle Eastern oil production had been shut in. OECD oil inventories fell to their lowest levels since 2003, while buyers that normally relied on Gulf suppliers searched for alternative barrels elsewhere.

The United States became one of the beneficiaries of that shift. U.S. exports of crude oil and petroleum products reached a record 13.6 million barrels a day in April, 15% above the previous record. Crude exports alone averaged 5.6 million barrels a day, while exports of distillates, propane and other petroleum products also increased as overseas buyers sought alternatives to Middle Eastern supplies.

The effects were not confined to crude prices. The EIA said disruptions through Hormuz pushed U.S. wholesale gasoline, diesel and jet-fuel prices higher, with particularly large effects on diesel and aviation fuel. Its July forecast still expected U.S. retail gasoline to average about $3.80 a gallon in the third quarter, before falling toward $3.40 in the fourth quarter as inventories recovered and summer demand eased.

A sustained return of the geopolitical premium would complicate that expected decline.

Fresh attacks are adding another layer of supply risk

The uncertainty surrounding Hormuz is developing alongside continued attacks on energy and shipping infrastructure elsewhere in the region.

Iran-aligned Houthi forces attacked Saudi Aramco’s Jazan refinery, delaying plans to restart the facility, according to Reuters. The United Arab Emirates’ ADNOC has also reported 15 attacks on vessels in the strait since the conflict began.

Those incidents do not necessarily remove large volumes of crude from the market by themselves, but they reinforce the risk facing companies attempting to move oil, refined products and other cargoes through the Gulf.

The key issue for prices is not simply whether some ships can transit Hormuz. It is whether traffic can return reliably enough for producers to restore output, insurers and shipping companies to normalize operations, and global inventories to rebuild.

That distinction helps explain why relatively small diplomatic changes have been producing unusually large daily moves in oil.

The June agreement between the United States and Iran had been enough for the EIA to sharply reduce its oil-price forecast. The agency’s June outlook, written before the agreement, had expected Brent to average around $105 a barrel in June and July because of continued shortages. After shipping traffic increased, its July forecast cut the expected third-quarter average to $74.

Monday’s Brent price above $86 remained well below the levels seen during the worst phase of the crisis, but it was substantially above the EIA’s projected third-quarter average.

There are also forces working against another sustained surge. Global oil demand has weakened compared with earlier forecasts. The EIA said in June that high fuel prices, reduced availability and changes in government policy were reducing worldwide oil consumption, particularly in Asia. The agency expected global oil demand in 2026 to decline by roughly 1.1 million barrels a day from the previous year.

That demand weakness can cushion the price effect of supply disruptions. It cannot eliminate the risk created by the loss of a major export corridor, but it means crude prices are being pulled in opposite directions by geopolitical constraints on supply and softer underlying consumption.

Wednesday’s CPI report makes the timing especially important

Oil’s latest move arrives at a sensitive moment for U.S. markets. The Bureau of Labor Statistics is scheduled to release the July Consumer Price Index at 8:30 a.m. Eastern Time on Wednesday, August 12. Economists were expecting headline inflation to ease slightly to about 3.4% year over year, according to Reuters.

That would follow a larger-than-expected slowdown in June, when headline CPI increased 3.5% from a year earlier after rising 4.2% in May. Core inflation, which excludes food and energy, slowed to 2.6% from 2.9%. Falling gasoline prices following the initial U.S.-Iran agreement were an important part of the improvement in the headline number.

The Federal Reserve therefore faces an unusual combination of weaker labor-market data and still-elevated inflation risk.

The U.S. economy unexpectedly lost 23,000 jobs in July, according to the latest employment report cited by Reuters, strengthening the case for the Fed to avoid tightening monetary policy further if inflation continues to cool. Market pricing for a September rate increase fell after the jobs report, with traders roughly evenly divided on whether the Fed would hike.

Oil complicates that calculation. Energy prices can move headline inflation quickly because gasoline, heating fuels and transportation costs feed directly into household expenses. Prolonged increases can also work indirectly through freight, air travel, manufacturing and other businesses that consume large quantities of fuel.

One day of higher crude prices will not materially change Wednesday’s July CPI report, which measures prices that have already occurred. The more important question is whether Monday’s rebound develops into a sustained increase that begins influencing August and later inflation data.

Financial markets were already responding to that possibility Monday. The U.S. dollar strengthened and Treasury yields moved higher as investors considered the combination of rising oil prices and the approaching inflation report. U.S. stocks were mixed to lower for much of the session, with the Dow and Nasdaq under pressure as the increase in crude renewed concerns about the inflation outlook.

The relationship between oil and Fed policy is not automatic. Policymakers generally pay close attention to underlying inflation rather than reacting to every short-term move in energy. But the 2026 Hormuz crisis has already demonstrated that a large and persistent oil shock can materially change headline inflation and consumer fuel costs.

Household inflation expectations also remain elevated. The Federal Reserve Bank of New York’s July survey showed consumers expecting inflation of 3.6% over the next year, little changed from June, while expectations for gasoline-price increases moved higher.

That makes the duration of the latest oil move more important than Monday’s percentage gain by itself.

If negotiations restore reliable traffic through Hormuz, the supply recovery assumed in the EIA’s July forecast could resume and some of the geopolitical premium could disappear again. If Iran and the United States remain far apart and attacks on regional infrastructure continue, traders may have to reconsider how quickly Middle Eastern production and shipping can normalize.

The next immediate test for U.S. markets comes Wednesday morning, when July CPI will show whether the earlier retreat in energy prices was enough to extend June’s inflation slowdown.

Sources

U.S. Energy Information Administration: Strait of Hormuz oil-flow data and energy-security analysis.

U.S. Energy Information Administration: July 2026 Short-Term Energy Outlook and assumptions about the recovery in Hormuz traffic.