U.S.-Iran strikes have renewed concerns that the Middle East conflict could become prolonged, with tensions around the Strait of Hormuz pushing regional oil benchmarks back above $100 a barrel.

Rising bond yields turn oil’s rally into a demand risk

Global bond yields have climbed to their highest levels since 2008 as higher oil prices fuel expectations that inflation will stay elevated for longer than previously assumed. That has raised concerns about weaker demand later on.

The bond-market rally accelerated after new Federal Reserve Chairman Kevin Walsh said he would finally tame U.S. inflation, which is currently at 3.4%. That pushed yields on the 10-Year Treasury bond to 4.76%.

The rise has spread to other developed markets. Yields on 10-year Japanese government bonds touched a 30-year high and moved above 3%, while 10-year UK bonds rose to 5.2%.

Higher yields increase borrowing costs for households and companies, slowing vehicle purchases, air travel, construction, manufacturing and freight, all of which can reduce demand. At the same time, they raise the cost of drilling, pipelines and large upstream developments, leaving the oil sector with a more expensive financing backdrop just as geopolitical risks are tightening supply routes.

The market is now pricing in an almost 60% chance that the Federal Reserve will raise rates by a quarter point at its meeting this month, marking a return to contractionary monetary policy.

Market movers

• U.S. midstream giant ONEOK (NYSE:OKE) has acquired Brazos Midstream's natural gas gathering and processing assets in West Texas for $4.4 billion, increasing its gas processing capacity by 1.2 bcf/d.

• Oil majors Shell (LON:SHEL) and Chevron (NYSE:CVX) have signed a preliminary agreement with the government of Ghana to enter the South Deepwater Tano oil block, in water depths of 3,000 meters. It is Ghana’s first new offshore license since 2018.

• Norway's state oil firm Equinor (NYSE:EQNR) has signed its second binding offtake agreement, alongside project partner Standard Lithium, for the SW Arkansas lithium project. The LG Energy Solution contract marks a major step toward a final investment decision later this year.

• UK-listed upstream specialist Energean (LON: ENOG) is reportedly in exclusive negotiations with UK major BP (NYSE:BP) to acquire part of BP's Egyptian upstream portfolio in a deal valued at around $1 billion.

• Norwegian upstream firm DNO (OSL: DNO) is set to buy UK upstream independent Capricorn Energy for $0.4 billion after outbidding the offer of Kurdistan-focused driller Genel Energy, expanding its portfolio with assets in onshore Egypt.

Tuesday, September 01, 2026

The first exchange of direct U.S.-Iran attacks in a month has revived fears that the conflict in the Middle East may continue into 2027. U.S. President Trump has threatened further strikes after the attack on Larak Island.

Washington’s sanctions on Tehran are making transits through Hormuz increasingly difficult, while Saudi Aramco’s attempt to boost flows from the Persian Gulf was quickly interrupted by Tehran’s drone attacks. ICE Brent is currently trading at $92 per barrel, while Middle Eastern benchmarks have moved back above $100 per barrel.

Hormuz recovery stalls after new tanker strikes

Two VLCCs carrying Saudi oil, Sidr and Senegal Prosperity, were hit by projectiles while leaving the Strait of Hormuz on Tuesday. The incidents threaten a fragile rebound in Gulf oil exports, just as Aramco lifted August loadings in the Gulf to 700,000 b/d.

Trump slams brakes on fuel economy rules

The Trump administration is preparing to sharply reduce U.S. vehicle fuel-economy requirements, rolling back stricter Biden-era standards and requiring a fleetwide average of 34.5 miles per gallon by 2031, down from the previous 50.4 miles per gallon target.

Texas refiners brace for Edouard

Saudi-owned Motiva and ExxonMobil (NYSE:XOM) are preparing refineries in Port Arthur and Beaumont for the arrival of Tropical Storm Edouard, activating storm-response measures as the system is expected to intensify into a hurricane and make landfall today.

U.S. secures major Venezuelan oil access deal

Venezuela has signed a long-term agreement covering 17 oil fields with more than 65 billion barrels of proven reserves, giving U.S.-backed operators, mostly Alejandro Betancourt's NABEP, a leading role in upstream development. Related: Norway Wants Europe’s Energy Market, Without Sharing Its Trade-Offs.

Pemex pushes supplier debt into the next decade

Mexico's state-owned Pemex has restructured about $15 billion in supplier and contractor obligations to ease immediate cash pressure. The company has extended $7.4 billion of repayment beyond 2030 and lowered its 2027 payout total to $1.3 billion.

Trans Mountain seeks final expansion push

Supported by Asian demand, Canada's federally owned pipeline company Trans Mountain has applied to expand its pipeline system by another 210,000 b/d. The move would raise total capacity to nearly 1.2 million b/d by late 2028, at an estimated cost of $2.9 billion.

Russia expands LNG shadow fleet

Russia has doubled the fleet serving its sanctioned Arctic LNG 2 project to 20 vessels, stepping up efforts to maintain LNG exports to China via the Northern Sea Route despite Western sanctions. August LNG loadings also reached a record 650,000 tonnes.

Zinc rally hits four-year high

Zinc prices rose to their highest level since 2022, reaching $3,980 per tonne this week. Mine disruptions, constrained Iranian supply and falling concentrate availability have tightened the market, marking the fifth monthly gain for the best-performing metal of 2026.

Solar overtakes coal in China's capacity race

China's installed solar power capacity has surpassed coal for the first time, reaching 1,286 GW and accounting for 31.5% of the country's power generation fleet. Solar generation rose 15% year on year to 802 billion kWh in January-July 2026.

Saudi Arabia turns to fresh borrowing amid wartime strains

Saudi Arabia is exploring at least $8 billion in new loans as the Iran war weighs on economic activity. The kingdom posted a 4.8% year-on-year GDP contraction in Q2 2026.

Bessent signals weekly Iran sanctions blitz

U.S. Treasury Secretary Scott Bessent said Washington is preparing to roll out new Iran-focused secondary sanctions every week, initially targeting banks and financial institutions, intensifying its "maximum economic pressure" campaign against Tehran.

Europe’s industry pushes to delay EU methane rules

Twenty energy industry associations are urging the EU to postpone its methane emissions regulation for three years until 2030. They warn of legal risks for oil and gas importers, saying long-term deals would willingly and knowingly breach applicable EU law.

Egypt targets Q4 restart for Damietta LNG

Egypt expects the Damietta FSRU damaged in a July drone attack to resume operations in Q4 2026. Officials say the loss of 5 mtpa of regasification capacity has not affected the Egyptian market because domestic natural gas production has risen.

Chile's economy stumbles as storms hit copper output

Chile's economic momentum weakened sharply in July after severe winter storms disrupted mining operations and pushed copper production to its lowest July level since 2011. Output fell 10% year on year to 403,424 metric tonnes.

By Tom Kool for Oilprice.com

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