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Oil market starts pricing in a prolonged Hormuz crisis
| Ron Bousso mirrorfeedback@timesofindia.com | Aug 19, 2026, 04:00 IST
Oil market starts pricing in a prolonged Hormuz crisis
The oil market is increasingly behaving as though disruptions to Middle East energy supplies are not a temporary shock but a new reality. Nearly six months after the US attack on Iran, hopes for a diplomatic breakthrough have faded. An interim ceasefire agreed on June 17 has collapsed, and the 60-day negotiating period has expired.
Instead, both sides are digging in. Iran warned on Monday it would escalate tensions unless Washington fully implemented the interim peace deal within weeks. An Iranian official told Reuters that, if diplomacy failed, Tehran would launch a “timely and precise” attack to break the US naval blockade.
The stalemate is increasingly forcing traders to contend with restrictions on shipping through the Strait of Hormuz. That shift in expectations helps explain why crude oil prices have stabilised around $90 a barrel. Crude has surrendered some of its panic premium since the early days of the conflict but remains roughly 50 per cent higher than at the start of the year. The market may no longer fear an immediate collapse in supplies, but neither does it expect a swift return to normal.
Behind the political rhetoric, the economic costs are mounting for both sides. Iran is under growing strain from the conflict and US blockade. The US is also paying a price. Trump has warned Americans to prepare for high fuel costs. The average price of gasoline stood at $4.06 per gallon on Monday, up 29 per cent from a year ago.
Yet while diplomats remain deadlocked, the oil market is adapting.
The biggest uncertainty is the scale of supply disruptions. Some lost volume has been offset by higher exports from the Fujairah terminal in the UAE and from Saudi Arabia’s Red Sea coast. Even those alternative routes, however, are under pressure after Yemen’s Iran-backed Houthis imposed a blockade on Saudi exports through the Bab El-Mandeb Strait, at the Red Sea’s southern entrance.
Evidence is mounting that Gulf producers are relying more heavily on vessels that disable tracking systems while transiting Hormuz and Bab El-Mandeb. The UAE, in particular, appears to have built a network of “dark tankers” that shuttle crude through Hormuz before transferring cargoes in the Gulf of Oman.
The result is an unusual situation in which traders know supplies have been disrupted but cannot determine by how much. How much oil is actually reaching consumers has therefore become one of the market’s biggest unknowns. As long as the Hormuz impasse remains unresolved, uncertainty will hang over energy markets.
The longer the Hormuz impasse drags on, the less this looks like a temporary supply shock and the more it resembles a structural reshaping of global oil trade.
—Reuters
Instead, both sides are digging in. Iran warned on Monday it would escalate tensions unless Washington fully implemented the interim peace deal within weeks. An Iranian official told Reuters that, if diplomacy failed, Tehran would launch a “timely and precise” attack to break the US naval blockade.
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The stalemate is increasingly forcing traders to contend with restrictions on shipping through the Strait of Hormuz. That shift in expectations helps explain why crude oil prices have stabilised around $90 a barrel. Crude has surrendered some of its panic premium since the early days of the conflict but remains roughly 50 per cent higher than at the start of the year. The market may no longer fear an immediate collapse in supplies, but neither does it expect a swift return to normal.
Behind the political rhetoric, the economic costs are mounting for both sides. Iran is under growing strain from the conflict and US blockade. The US is also paying a price. Trump has warned Americans to prepare for high fuel costs. The average price of gasoline stood at $4.06 per gallon on Monday, up 29 per cent from a year ago.
Yet while diplomats remain deadlocked, the oil market is adapting.
The biggest uncertainty is the scale of supply disruptions. Some lost volume has been offset by higher exports from the Fujairah terminal in the UAE and from Saudi Arabia’s Red Sea coast. Even those alternative routes, however, are under pressure after Yemen’s Iran-backed Houthis imposed a blockade on Saudi exports through the Bab El-Mandeb Strait, at the Red Sea’s southern entrance.
Evidence is mounting that Gulf producers are relying more heavily on vessels that disable tracking systems while transiting Hormuz and Bab El-Mandeb. The UAE, in particular, appears to have built a network of “dark tankers” that shuttle crude through Hormuz before transferring cargoes in the Gulf of Oman.
The result is an unusual situation in which traders know supplies have been disrupted but cannot determine by how much. How much oil is actually reaching consumers has therefore become one of the market’s biggest unknowns. As long as the Hormuz impasse remains unresolved, uncertainty will hang over energy markets.
The longer the Hormuz impasse drags on, the less this looks like a temporary supply shock and the more it resembles a structural reshaping of global oil trade.
—Reuters
