Oil Market: Geopolitical Easing Hits Prices Hard
Global oil prices are undergoing the sharpest reassessment since the beginning of the year. Brent crude is trading around $79–80 per barrel, while American WTI is around $75–76. Just at the end of July, the international benchmark was above $90 due to attacks on tankers in the Persian Gulf. However, Washington's decision to postpone military operations against Iran and to initiate direct negotiations has sent the market downward. The weekly price drop approached 10% as traders swiftly removed the "war premium" that had built up since spring.
Volatility remains extreme: on Wednesday, oil briefly increased in price following reports of Houthi attacks on a Saudi vessel in the Red Sea, reminding that risks to maritime logistics extend beyond just the Strait of Hormuz. Nevertheless, the dominant trend is a focus on de-escalation. Analysts warn that should negotiations fail, a return to prices of $90 and above could occur within hours.
Strait of Hormuz: Parameters of a Historic Agreement
A key event for the global oil and gas market is the interim agreement between the US, Iran, and Oman regarding the opening of the Strait of Hormuz, through which about 20 million barrels of oil and oil products passed daily before the crisis. The announcement of this deal was anticipated on Wednesday, August 5. The main parameters of the discussed scheme are as follows:
- Duration — 60 days, with the possibility of extension; the regime aims to solidify a ceasefire and pave the way for negotiations on Iran's nuclear program.
- Separate navigation routes: vessels entering the Persian Gulf will follow the northern corridor through Iranian territorial waters, while those exiting will take the southern route, through Omani waters.
- No transit fees: tariffs and charges for passage will not be imposed.
- Mine clearance of the main shipping channel within 30 days, after which a transition to permanent bilateral shipping may occur.
For Bahrain, Iraq, Kuwait, and Qatar, which lack alternative export routes, the opening of the strait means the restoration of critically important flows of oil and LNG. At the same time, Washington emphasizes that if negotiations fail, a military scenario will return to the negotiating table.
OPEC+: Alliance Completes Return of Voluntary Cuts
At a virtual meeting on August 2, the "seven" OPEC+ — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman — agreed to increase oil production in September by 188,000 barrels per day. This step completes the return to the market of 1.65 million bpd that had been cut in the second phase of voluntary restrictions since April 2023. Until the end of 2026, approved quotas will be in effect without additional cuts; the next monitoring meeting is scheduled for September 6.
The paradox of the current moment is that Persian Gulf countries have been physically unable to utilize their quotas due to the blockade of the Strait of Hormuz. The opening of this key artery could quickly restore significant volumes to the market, which would increase pressure on prices in the second half of the year — a factor that investors should incorporate into their models now.
Gas Market: Europe Races for LNG Ahead of Winter
The European gas market remains the most strained segment of the global fuel and energy sector. The crisis in the Strait of Hormuz has removed about one-fifth of global LNG supply — primarily from Qatar — exacerbating competition between European and Asian buyers. The consequences are palpable:
- TTF hub prices remain in the range of €56–59 per MWh — approximately 30% higher than levels at the end of June;
- EU underground gas storage facilities (UGS) are only filled to 55–56% — a minimum for this time of year in nearly two decades;
- Brussels has lowered the mandatory target filling level for UGS by November 1 from 90% to 80%, acknowledging supply constraints.
A hopeful sign was the first transit of a Qatari LNG tanker through the Strait of Hormuz since early July at the end of July. If the agreement regarding the strait works, a resumption of Qatari shipments could significantly cool gas prices and hasten the filling of European storage facilities. Otherwise, the market may start pre-emptively incorporating a winter shortage into prices.
Refining: Global Fuel and Capacity Deficit
The global refining sector is functioning under multiple shocks. Damage to refineries in the Middle East, strikes on refining infrastructure amid the Russia-Ukraine conflict, China’s restrictions on fuel exports, and Russia’s ban on diesel exports have all squeezed global motor fuel supply. Crack spreads remain elevated, supporting the margins of surviving plants, while European refiners diversify their raw material sourcing by increasing oil imports from Guyana to bypass traditional Middle Eastern routes.
Russian Fuel Market: Export Restrictions Until 2027
The Russian government has extended the total ban on motor gasoline exports until January 31, 2027 — an unprecedentedly long period of restrictions reflecting the depth of the imbalance in the domestic market. An embargo on diesel fuel exports will remain in place at least until the end of August. The reasons for this toughening are:
- Increased drone attacks on Russian refineries since March, reducing motor fuel production;
- High seasonal demand during the vacation and harvesting season;
- The need to curb the rise in market and retail prices at gas stations.
The effect is already apparent in the diesel segment: exchange sales of summer diesel fuel at St. Petersburg International Mercantile Exchange doubled in a week, and the market discusses the risk of overstocking, which could force refineries to reduce production capacity — with a side effect of reduced gasoline output. Regulators will need to balance between saturating the domestic market and maintaining the economics of refining.
Electric Power and Renewables: Renewable Generation Establishes Dominance
The global energy transition continues to set records. By the end of 2025, renewable energy sources will, for the first time in a century, surpass coal in the global power balance — 33.8% versus 33.0% of generation. In 2026, the trend strengthens: in the US during the first quarter, solar plants and storage systems accounted for 91% of all new capacities, and the renewable sector may attract up to $120 billion in investments within a year. California's energy system recorded solar generation covering up to 72% of demand in the summer, while Texas set records in solar output and battery contributions during evening peaks. Notably, in China and India — the world's largest coal power systems — fossil generation decreased for the first time concurrently in 2025: clean energy is growing faster than demand. Additional pressure on oil demand is created by electric transport: the Chinese fleet of electric vehicles alone replaced about 34 million tons of oil in the first half of 2026.
Coal: Correction After Geopolitical Rally
The coal market moves in line with Middle Eastern geopolitics. Newcastle thermal coal, which soared to multi-year highs in the second quarter amid the US-Iran conflict and Indonesia's export restrictions, has corrected to $127–130 per ton — still about 16% above last year's level but significantly lower than May’s peaks. Coking coal, which had reached around $240 per ton, has also fallen as de-escalation occurs. Demand in Asia remains a structural support for the market: the needs of the electricity sectors in India, China, and ASEAN countries support steady imports, while under-investment in new export capacities limits supply elasticity.
Key Indicators for Investors as of August 6
The agenda for the upcoming trading sessions centers around several factors:
- Official announcement of the agreement regarding the Strait of Hormuz — the main trigger for oil, gas, and freight rates; confirmation of the deal will increase pressure on Brent, while a breakdown will return prices to $90.
- Recovery rates of Qatari LNG exports — a defining factor for European gas prices and the pace of UGS filling ahead of winter.
- Data on US oil and petroleum product inventories — an indicator of supply-demand balance in the midst of the driving season.
- Trends in fuel prices on Russian exchanges following the extension of export bans.
- September OPEC+ production increases and the Gulf countries' ability to effectively utilize quotas with the opened strait.
For the fuel and energy market players, the coming weeks will serve as a test of how stable the diplomatic easing in the Middle East is. The combination of increasing OPEC+ supplies, the potential return of Gulf barrels, and record expansion of renewables forms a bearish backdrop for oil prices in the second half of 2026 — however, the fragility of the ceasefire and the vulnerability of logistics from the Red Sea to Suez leave the market with ample room for new price shocks.
