Oil prices opened 2% higher during the Asian and European trading sessions on Monday, before fluctuating at elevated levels. West Texas Intermediate (WTI) crude futures were trading around $85.22 per barrel, up 2.18% for the session. Over the weekend, US forces bombed two missile silos on Iran's Larak Island, which were suspected of being used to lay naval mines. Iran responded quickly by launching ballistic missiles at a US military base in Jordan. This aligns precisely with the repeated signals from last week's analysis: when oil prices retreat and international attention on Iran wanes, Iran is highly likely to find an opportunity to initiate a suspected mine-laying incident, ultimately triggering a US-Iran standoff and driving oil prices higher.
Recently, the US military's resumption of strikes against Iran, the near-paralysis of Strait of Hormuz shipping, stalled negotiations between Washington and Tehran, and extreme US economic sanctions have combined to create a confluence of factors that continues to disrupt global crude supply chains. International oil prices have once again received a boost from geopolitical risk premiums, lifting them higher.
US-Iran Military Clashes Resume, Regional Tensions Escalate Again
On Sunday, US forces conducted a precision strike on rocket launch facilities on Iran's Larak Island in the Strait of Hormuz. This marked the first US military action against Iran in a month, following a large-scale air campaign on July 29, breaking several weeks of relative battlefield quiet between the two sides. The US Central Command explicitly stated that the operation was a preventive, defensive strike. Intelligence indicated that Iran's Islamic Revolutionary Guard Corps (IRGC) was preparing to deploy rockets and naval mines in the Strait's international shipping lanes. The US had just completed mine-clearing operations in the main channel the previous week. The stated goal of the strike was to protect the safe passage of global commercial vessels and uphold the international trade order, not to provoke a conflict.
The strike directly triggered a forceful Iranian response. Iranian officials confirmed they launched ballistic missiles at a US base in Jordan in retaliation. Jordanian military forces monitored and successfully intercepted eight incoming missiles, with no reported casualties or damage. Iran has explicitly declared the Strait of Hormuz a non-negotiable strategic red line. It is currently finalizing a joint management proposal for the Strait with Oman. Iran insists it will not fully reopen the waterway until the US completely ends its war, lifts blockades and sanctions, and provides war compensation. It also reserves the right to strike any vessels passing through without permission.
The US has abandoned any short-term military victory strategy, pivoting instead to a dual approach centered on maximum economic sanctions, backed by military deterrence. US Treasury Secretary Scott Bessent publicly stated that a new round of comprehensive sanctions would cut off all of Iran's revenue sources. The plan also includes secondary sanctions designed to pressure Iran's major trading partners, including China, Turkey, and the United Arab Emirates (UAE), into ceasing economic ties with Tehran. The UAE has already announced a complete suspension of trade with Iran, further constricting Iran's external economic lifelines. The IRGC has responded defiantly, condemning the US action as a fatal misstep within the context of an economic war, and vowing comprehensive retaliation across both military and economic dimensions. Regional tensions are once again on an upward trajectory.
A core driver behind the US strategic shift is its own dwindling weapons stockpiles. Sustained Middle East operations have consumed vast quantities of advanced air-defense interception munitions. Patriot missile inventories for both the US and NATO in Europe are at persistently low levels, making long-term, high-intensity military engagement unsustainable. The costs and risks of forcibly opening the Strait by military means are deemed too high. Concurrently, the ongoing battlefield stalemate is reshaping the Middle East geopolitical landscape. Gulf states' trust in the US security umbrella has eroded significantly. Nations like Saudi Arabia are beginning to explore new defense cooperation frameworks with Pakistan and Turkey, signaling a continued weakening of US dominance in the region.
Strait of Hormuz Shipping Nearly Halted, Crude Transport Chains Severely Contracted
Shipping data reveals a dramatic collapse in vessel traffic through the Strait of Hormuz. By the end of August, the number of monitored commercial vessels transiting the waterway on a weekend day had plummeted to an average of just five, all of them small craft. This included only two liquefied petroleum gas carriers; large crude oil tankers have virtually vanished from the route. Before the conflict, the Strait saw an average of around 130 transits per day. Current traffic is less than 4% of normal levels. To evade potential attacks, many commercial ships are turning off their Automatic Identification Systems (AIS) for covert passage. While the actual number of vessels is likely slightly higher than monitored figures, the overall picture of stagnant shipping remains unchanged.
The security environment in the Strait continues to deteriorate, with frequent attacks. In the past week alone, the UK Maritime Trade Operations office recorded three separate attacks on vessels in the area. The latest incident occurred on Saturday when a tanker was hit by an unidentified projectile in waters north of Khassab, Oman. Fortunately, there were no casualties or reports of marine pollution. Shipping companies are adopting extremely conservative strategies, proactively reducing, rerouting, or canceling voyages through the Strait. This has significantly decreased the efficiency of global crude oil maritime transport. As of Sunday, the US naval blockade had forced a total of 83 commercial vessels to change course and detained three ships at Iranian ports, further exacerbating waterway congestion and supply tensions.
Iran's Economy in Deep Recession, Sanctions Pressure Test Strategic Resolve
The combination of prolonged sanctions and six months of conflict has plunged Iran's economy into a deep recession. The Iranian rial has hit a record low of 2,020,000 rials to the US dollar. Since the war began, the price of rice has surged 60% and beef prices have skyrocketed 150%, causing rampant inflation in basic goods. The IMF projects Iran's GDP will contract by more than 5% this year, with unemployment continuing to climb, pushing a significant portion of the population into hardship. However, this economic pressure has not translated into political compromise. Drawing on years of experience in surviving sanctions, Iran is leveraging domestic production, cross-border grey-market trade, and shadow tanker fleets to circumvent restrictions, demonstrating a resilience that has exceeded US expectations.
More critically, the strategic leverage provided by its control over the Strait allows Iran to continually pressure the US, compelling Washington to absorb the economic and political fallout of higher energy prices leading up to the midterm elections.
Summary and Technical Analysis
There are currently no signs of a de-escalation in the US-Iran conflict, and the depressed shipping activity in the Strait of Hormuz is likely to persist. Iran seeks US concessions, having nearly finalized an agreement with Oman. It is wary of fully opening the Strait, as oil prices and control of the waterway represent its most vital bargaining chips. The US, wanting to prevent an uncontrolled surge in oil prices, will likely opt for economic containment to wear Iran down, hoping to increase domestic pressure on Tehran and force it to the negotiating table.
Global crude supply chains will continue to face structural disruptions. Shipping constraints and heightened geopolitical risks will sustain support for elevated oil prices, which are likely to remain in a wide trading range. Should the conflict escalate further, a renewed sharp price spike cannot be ruled out, intensifying global energy inflation and economic recovery pressures. The overarching dynamic remains that upward price movements face potential bearish news from the US, while downward movements encounter bullish catalysts from Iran, resulting in a broadly range-bound market. Given domestic inflationary pressures, sovereign debt concerns in the US, and some tankers covertly transiting the Strait, we maintain the view that oil prices remain largely manageable.
On the technical front, WTI crude is currently retreating from a triangle resistance line. Support is located around the $83 level, while resistance lies near the orange trendline of the triangle pattern. As of 15:55 Beijing time, WTI crude oil futures were trading at $85.13 per barrel.