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 costs back at the center of the inflation debate 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 become more optimistic that talks 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, while 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 the two sides far apart even as Oman continued diplomatic efforts.

The significance extends well beyond a single day’s move in crude futures because 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 rally showed how sensitive that outlook remains to setbacks in the reopening process.

The oil market had started pricing in a return toward normal

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, but the June average fell to $85 as expectations grew that the strait would reopen and shut-in production would return.

Price swings within 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 conditions 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, a forecast that depended on continued improvement in shipping through Hormuz.

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

The supply shock earlier this year was large enough to reshape global 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 shipments of distillates, propane and other petroleum products also increased as overseas buyers sought alternatives to Middle Eastern supplies.

Higher crude costs also fed into refined products. 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 renewed and sustained geopolitical premium in crude would make that expected decline harder to achieve.

Regional attacks keep the supply picture fragile

The shipping issue is unfolding alongside continued attacks on energy and maritime infrastructure elsewhere in the region. Iran-aligned Houthi forces attacked Saudi Aramco’s Jazan refinery, delaying plans to restart the facility, according to Reuters, while the United Arab Emirates’ ADNOC has 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 increase the operational risk for companies moving oil, refined products and other cargoes through the Gulf. For prices, the central question is not simply whether some ships can transit Hormuz. What matters 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 reliability is why relatively small diplomatic changes have been producing unusually large daily moves in crude. The June agreement between the United States and Iran was enough for the EIA to sharply reduce its oil-price forecast. Before the agreement, the agency’s June outlook had expected Brent to average around $105 a barrel in June and July because of continued shortages. Once shipping traffic increased, the July forecast cut the expected third-quarter average to $74.

Monday’s Brent price above $86 remained well below levels seen during the worst phase of the crisis, but it was still substantially above the EIA’s projected third-quarter average. At the same time, weaker global demand is providing a counterweight to the supply risk.

The EIA said in June that high fuel prices, reduced availability and changes in government policy were weighing on 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. Softer consumption can cushion the effect of supply disruptions, but it cannot fully offset the risk created by restrictions on one of the world’s most important energy-export corridors.

CPI will show whether earlier energy relief reached consumers

The latest rise in crude comes 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, and 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 is therefore confronting weaker labor-market data at the same time that energy remains a source of 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.

Higher oil prices complicate that calculation because energy can affect headline inflation quickly through gasoline, heating fuels and transportation costs. A prolonged increase can also work indirectly through freight, air travel, manufacturing and other businesses that consume large quantities of fuel.

Monday’s rebound will not materially change Wednesday’s July CPI report because that release measures prices that have already occurred. The more important question is whether crude remains elevated long enough to influence August and later inflation data.

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

The relationship between crude and Fed policy is not automatic, since policymakers generally focus on underlying inflation rather than reacting to every short-term move in energy. Even so, the 2026 Hormuz crisis has already shown that a large and persistent oil shock can materially affect 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.

What matters from here is whether Monday’s jump becomes a sustained repricing or fades as diplomacy and shipping conditions improve. 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. If Iran and the United States remain far apart while 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 the July CPI report 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.