Oil markets and Middle East producers appear to be aligning around a new reality: The Strait of Hormuz is no longer expected to return to a prewar norm.
Renewed fighting over the weekend and President Trump's announcement that he was reimposing the U.S. blockade on Iranian shipping through the strait pushed Brent and U.S. crude futures up nearly 10%, wiping out a month of oil-price declines that came as skirmishing in the Persian Gulf waned and tanker traffic appeared to be returning.
Brent crude futures jumped 9.6% to settle at $83.30 a barrel, the largest daily percentage gain since May 2020, when prices were climbing back from the Covid lockdown crash. U.S. crude futures, which were more volatile this spring, rose 9.4% to settle at $78.14 a barrel, their fourth biggest daily gain of 2026.
"The chance of the region and Hormuz going back to the old normal is effectively zero," said Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, a Washington-based think tank. "If anything this reinforces the impetus to invest in other pathways as quickly as possible."
Saudi Arabia, Iraq and the United Arab Emirates have identified the strait as a persistent vulnerability that must be engineered around. They plan to build new and expanded pipeline capacity to other ports -- and through other countries -- to keep pumping oil.
In total, new and expanded pipelines could allow more than 45% of prewar Gulf oil exports to bypass Hormuz by the end of 2027, according to Goldman Sachs. If plans are accelerated, pipelines would cover 75% of the region's oil exports by the end of 2028, the bank said in a note to clients.
But building alternate routes to give the region's energy-export system more resilience will take billions of dollars, and the pipelines meant to bypass the strait and its vulnerability could themselves become targets.
"It's easier to build new pipelines than to fully protect them from potential attacks," Ziemba said.
The resumption of fighting prompted the reversal in prices and revived a trading strategy that Wall Street has dubbed the NACHO trade, an acronym that stands for "Not a Chance Hormuz Opens."
The idea behind the NACHO trade is that the shipping route through which roughly 20% of the world's oil had passed will remain virtually shut, with only a trickle of traffic slipping through clandestine routes, until the economic costs of its closure, such as high oil prices and accelerating inflation, become untenable.
"The market was too quick to treat the partial reopening as the end of the crisis," said Henry Hoffman, co-portfolio manager of the Catalyst Energy Infrastructure Fund.
Hoffman and other investors note the heightened risk that prices could shoot even higher given the depletion since then of stockpiles around the world, particularly the U.S. Strategic Petroleum Reserve.
The government's stockpile of crude has been drawn down to its lowest level since 1983 as the Trump administration has pumped oil into the market in an effort to keep fuel prices in check.
Despite growing confidence among traders and analysts that oil prices are poised to climb anew, speculators whipsawed by nearly five-months of on-again, off-again war are retreating. Recent futures trading data shows a decline in positions held by hedge funds and other speculators, which reduces liquidity, or the ability to trade at expected prices.
"The uncertainty over the recent flare-up in tensions -- whether it will be short-lived or more sustained -- seems to be keeping a large share of market participants on the sideline," analysts with Dutch investment bank ING wrote to clients.
Even before the latest flare-up, recent announcements shed light on Gulf oil producers' thinking. Saudi Arabia has been moving more crude west to the Red Sea by pipeline and increasing export capacity there. The U.A.E. is investing to expand pipeline and port capacity outside the strait. Iraq is trying to revive other export routes over land through Turkey, Syria and Jordan.
As oil flows out of the Middle East remain in question, producers from frackers in the U.S. to oil majors and state-run enterprises in Kazakhstan, Brazil and Venezuela have been ramping up. Many Asian oil buyers are taking more cargoes from Latin America, West Africa and the U.S. to rebuild their strategic stockpiles as they seek to reduce exposure to the strait. U.S. crude and petroleum-product exports hit records this spring.
China, the world's largest oil importer, has taken a different approach, dramatically dialing down its imports. The country shows little urgency to ramp up at current prices, analysts say.
The massive amount of Iranian oil that is already on the water outside of the U.S. blockade line will make it harder to inflict pain on Iran's economy this time around, compared with the spring. As of last week, more than 34 million barrels of Iranian crude oil had moved through the strait since the U.S. lifted its blockade on June 18 according to shipping data firm Kpler.
June shipments were close to prewar levels, according to United Against Nuclear Iran, a nonprofit.
This week's military action is part of a longer cycle of escalation and retaliation, said Clionadh Raleigh, founder and chief executive of Acled, a conflict monitoring group.
"Unless there is some sort of major knockout -- which the U.S. has so far been unable to produce -- I struggle to see a negotiated solution," Raleigh said. "Even if attacks subside temporarily, the underlying dispute over the strait will remain, making future flare-ups highly likely."
Write to Georgi Kantchev at georgi.kantchev@wsj.com, Ryan Dezember at ryan.dezember@wsj.com and Rebecca Feng at rebecca.feng@wsj.com
(END) Dow Jones Newswires
July 13, 2026 18:38 ET (22:38 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
