To The Moon

Oil prices surged dramatically on Monday, with intraday gains exceeding 10%, pushing Brent crude back above the $80 per barrel mark. A sharp escalation in geopolitical risk ignited the rally, driving a significant, geopolitically-fueled upward move in crude oil.

The United States announced it would block Iranian ports starting at 4 a.m. on the 15th, with former President Trump stating the US would reinstate a "blockade of Iran" and impose a 20% fee on all cargo shipments. He previously suggested that if the US were to take the lead in securing the Strait of Hormuz, it should be compensated, positioning the US as the guardian of the strait, while inadvertently revealing the underlying motive: "simply to recoup our operational costs and compensate for the risks we take in the strait." He also claimed Iran consistently violates agreements, necessitating strong action. Former President Trump has notified Congress of renewed hostilities with Iran, following five rounds of US military strikes against the country within a week. Threats were made to strike Iran's "Gachin" underground nuclear facility, with warnings of continued intense airstrikes. In an interview, Trump stated the US would be in conflict with Iran for some time, believed a deal with Iran was possible, and expressed a desire for nations benefiting from US protection of the Strait of Hormuz to reimburse the US.

The struggle for control of the Strait of Hormuz has reignited. Prior to the US blockade announcement, Iran's Islamic Revolutionary Guard Corps Navy declared early on the 12th that the Strait of Hormuz was closed effective immediately, prohibiting all vessel traffic. Iran's Foreign Ministry indicated that the core topic of talks held Saturday in Muscat was control of the Strait of Hormuz, but pressure from the US on Oman prevented a successful outcome. Reports suggest Oman has drafted a proposal for managing shipping in the strait, aiming to organize traffic through two independently managed channels. According to the yet-to-be-finalized agreement, both channels would remain open. The southern channel, within Omani territorial waters, would allow free passage as per pre-war patterns. The northern channel, within Iranian territorial waters, would require prior Iranian approval for transit. Iran has rejected the proposed terms concerning the strait. This diplomatic impasse prompted the US to immediately reinstate sanctions and reimpose a maritime blockade. An advisor to Iran's Supreme Leader stated the Strait of Hormuz is irreplaceable and Iran would not concede. Iran's Supreme Joint Military Headquarters accused the US of frequent adventurism and malicious attempts to interfere with the strait's management, severely endangering regional security, international trade, and the passage of tankers and commercial vessels. It lamented that the cooperation of certain regional countries also increases the risk of war spreading throughout the region. As US-Iran military friction intensified, Iran reportedly struck multiple "violating" vessels within the Strait of Hormuz again on Monday, with several tankers targeted.

There are signs of the geopolitical conflict spreading. Sana'a International Airport in Yemen was hit by multiple Saudi airstrikes, prompting Yemen's Houthi rebels to subsequently attack a Saudi airport. The Houthi leader stated the group would target Saudi Arabia's "critical infrastructure." Any strike on Saudi oil facilities could once again shock the market.

OPEC's monthly report released Monday showed the organization has lowered its demand forecast for the third consecutive month, revising down its 2026 global oil demand growth expectation to 780,000 barrels per day. High-frequency data from third-party agencies indicates Chinese market demand remains sluggish, persistently dragging on the pace of global demand recovery. On the supply side, OPEC's daily production in June was 22.002 million barrels, an increase of 305,100 barrels from the previous month. This situation has kept investors cautious about the trend towards oversupply, tempering the oil price rebound. However, by Monday's night session, as geopolitical risks escalated comprehensively, additional geopolitical premium was injected into the market, stirring up nervousness and suggesting oil prices have further room to climb. Attention should be paid to market rhythm, and participation should be cautious.

Daily Market Movements

WTI crude oil futures rose by $6.73, or 9.42%, to settle at $78.14 per barrel. Brent crude oil futures gained $7.29, or 9.59%, to settle at $83.3 per barrel. INE crude oil futures increased by 6.2%, closing at 500.3 yuan.

The US Dollar Index rose 0.34% to 101.31. The Hong Kong Exchange's USD/CNY rate increased 0.09% to 6.754. The US 10-Year Treasury yield fell 0.39%, with the price at 108.64. The Dow Jones Industrial Average declined 0.26% to 52,498.64.

Recent Key Developments

US-Iran Conflict Drives Oil Prices Toward $80, Strait of Hormuz Traffic Plummets, Covert Passage Becomes Norm

Crude oil markets rallied sharply on Monday. August WTI futures rose 2.8% to $72.83 per barrel, briefly touching $75.08 intraday. August Brent futures gained about 2.9% to $77.60, approaching the $80 mark in early trading.

An Iranian Foreign Ministry spokesperson stated Monday that the US-Iran understanding has undoubtedly entered a crisis phase. Iran claims the Strait of Hormuz has ceased traffic, but US Central Command refuted this, stating Iran does not control the strait and traffic is flowing.

Ship-tracking data showed only six vessels transited the Strait of Hormuz on Sunday, the lowest level in five weeks. UBS analysts noted that over the past three days, the number of so-called covert transits has exceeded observable traffic, with transiting vessels turning off transponders to avoid risk.

A Saxo Bank strategist indicated that while market concern over the safe passage of oil and other commodities through the waterway has increased, the relatively modest premium between near-month and longer-dated futures suggests the physical crude market remains orderly for now.

A Tickmill Group strategist pointed out that current Brent prices are well below the $95 level seen after the conflict escalated in late February and the $100 level from late May. With the 10-year US Treasury yield above 4.5%, the current oil price level does not appear significantly misaligned from a reasonable range. The yield rose slightly by 1.7 basis points to 4.579% on Monday.

The future direction of oil prices depends on the actual recovery of traffic through the Strait of Hormuz, whether US-Iran military conflict escalates further, and the progress of international diplomatic mediation efforts.

Nigeria's Crude Output Hits Six-Year High, Exceeds Quota, Adding Supply Pressure to Market

Data released Sunday by Nigeria's upstream regulator showed the country's average daily crude oil production rose to 1.56 million barrels per day in June, 4% above its OPEC-assigned quota of 1.5 million barrels per day, achieving a 104% compliance rate.

Including condensates, which are not subject to quotas, Nigeria's total oil output averaged 1.735 million barrels per day in June, up from 1.70 million in May, marking a fourth consecutive month of growth.

This production level is the highest since April 2020 and a peak over the past 74 months, primarily driven by stable operations and improved pipeline reliability.

Smooth operation of production assets and the absence of major pipeline disruptions have effectively supported crude extraction and export efficiency, aiding the continued release of the country's supply capacity.

The evident recovery in supply, coupled with demand concerns sparked by tariff-related comments, has made market expectations for the supply-demand balance more cautious, strengthening near-term downward pressure on prices.

Subsequent market focus will center on whether Nigeria can maintain its current output level and the compliance of other oil-producing nations within the quota framework. Supply-side variables may become a core disruptive factor in near-term oil market pricing.

Trump Proposes New Strait of Hormuz Rule: 20% Fee on Transit Cargo, Potentially $30 Million per Supertanker

Former US President Trump announced on July 13 that the US would reinstate a maritime blockade against Iran and, effective immediately, become the "guardian of the Strait of Hormuz." He stated that, in the interest of fairness, the US would impose a 20% fee on all cargo transiting the area to compensate for the costs of maintaining security in this volatile region.

Trump posted on social media platform Truth Social that the Strait of Hormuz is open and will remain open, regardless of Iran's involvement. He emphasized the blockade "is only for Iranian vessels or clients, restricting their access to and from the Strait," while other countries can use the strait fairly and openly.

Based on an estimated current oil price of around $80 per barrel, a supertanker carrying 2 million barrels of crude, with a total cargo value of approximately $150 million, would face a fee of about $30 million. In contrast, Iran's previous temporary charges were up to $2 million per voyage.

In an interview with Fox News, Trump stated, "We will hold the Strait, and we will likely control it. We will be the guardian of the Strait and should be compensated for it." He also threatened that if Iran does not comply, the US would "hit them very hard."

Iran responded swiftly. A spokesperson for Iran's Armed Forces Khatam al-Anbiya Central Headquarters stated that interference by the US in the management of the Strait of Hormuz would not be tolerated and warned of a strong response to any unauthorized US interference with commercial vessel passage.