The Commodities Feed: Oil Rises as Middle East Tensions Reignite

Oil & Companies News, 29/07/2026

Energy – Persian Gulf tensions resurface

After a sharp sell-off in the oil market over the previous three days, prices moved higher in early morning trading, with Brent up more than 4% at the time of writing. The rebound followed a US statement that it intercepted a surprise attack on US troops. Saudi Arabia also intercepted drones from Iranian-backed groups in Iraq that were targeting Saudi energy infrastructure. In response, US and Saudi forces are carrying out strikes on weapon sites across eastern Iraq.

The latest developments undercut expectations of a rapid de-escalation in the Persian Gulf, where shipping routes and export infrastructure remain central to global energy supply. With Saudi oil infrastructure increasingly under threat, the risk of longer-lasting supply disruptions is rising. Reports also suggest that the 400k b/d Jazan refinery in Saudi Arabia has shut after Houthi attacks over the weekend. If confirmed, that would add to tightening concerns in the refined products market, which is already contending with disruptions from both the Persian Gulf and Russia.

The strain is especially visible in middle distillates. The ICE gasoil crack has climbed above $70/bbl to record levels, while the prompt ICE gasoil timespread has moved into backwardation of more than $80/bbl. For middle distillates, there appears to be little immediate relief.

At the same time, tanker traffic through the Strait of Hormuz remains effectively halted. Iran and Oman have discussed ways to manage vessel transits through the strait, but Iran has rejected Oman’s proposal for a 50-50 shipping plan, which would place the inbound route on one country’s side and the outbound route on the other’s. Instead, Iran wants oversight of both inbound and outbound vessels.

OPEC+ is expected to announce a supply increase of 188k b/d for September when the group meets on 2 August. That would complete the unwinding of the 1.65m b/d of voluntary cuts announced in 2023. There are also reports that the group is likely to pause further supply increases after the September move. Even so, announced supply increases do not necessarily translate into actual higher output given ongoing disruptions in the Persian Gulf. After those disruptions, the planned increases reinforce the view of a well-supplied market through 2027. The main uncertainty through 2027 remains OPEC+ policy, including the possibility of pushback on output quotas, especially after the disruptions faced by several producers this year.

The latest API inventory figures showed that US crude oil inventories fell by 3.3 million barrels last week. Refined products saw some relief, with gasoline stocks rising by 900,000 barrels and distillate stocks increasing by 400,000 barrels. The more closely watched EIA data will be released later today.

European natural gas prices also moved higher this morning after the renewed Middle East tensions. The European gas market is looking increasingly vulnerable heading into winter. QatarEnergy has reportedly extended its force majeure for buyers in Asia and Europe through the end of September. There are also reports that QatarEnergy is seeking to subcharter an LNG carrier until the end of October because of ongoing disruptions to Qatari LNG exports.

EU LNG imports are set to fall by a little more than 25% year on year in July, making storage replenishment more difficult. EU gas storage is currently 56% full, below the 10-year seasonal average of 72%. Heatwaves across Europe will only add to the challenge of filling storage before winter. Tighter-than-usual storage levels at the start of the heating season suggest that gas prices may remain elevated through the winter, with the risk of further spikes.

Metals – Gold under pressure ahead of Fed decision

Gold prices came under renewed pressure as the market adopted a cautious stance ahead of today’s Federal Reserve policy meeting. The market expects the Fed to keep rates unchanged on Wednesday, while pricing in more than a 30% chance of a 25bp hike. Higher oil prices, driven by the renewed escalation in the Middle East, are also likely to weigh on gold in early trading as inflation concerns return.

The latest COTR report showed that the speculative net long position in LME copper increased by 12,668 lots to 60,771 lots in the week ending 24 July. The move reflected increased participation from both long and short positions. Tight supply conditions and low inventories supported broader market sentiment. Positioning changes in other base metals were more limited, with money managers increasing their net long in LME aluminium by just 96 lots to 59,264 lots, while the net long in zinc rose by 4,107 lots to 39,736 lots.

Agriculture – Declining inventories drive Arabica coffee higher

Arabica coffee extended its rally on Tuesday, settling more than 4.5% higher. The move came amid falling exchange inventories and heightened near-term supply concerns. ICE-monitored coffee stocks at US port warehouses declined by 18.5k bags on 27 July, marking a 25th consecutive daily drop to 292.8k bags, the lowest level since February 2024.

Although global coffee production is expected to reach a record high in the 2026/27 season, supported by a strong Brazilian arabica crop, arrivals have been slower than expected. Heavy rainfall in Brazil’s Minas Gerais region disrupted harvest activity. Even with expectations of a production surplus later in the season, tighter nearby supply has pushed the prompt Arabica timespread into pronounced backwardation, with the Sep/Dec spread rising above USc22/lb.

Source: ING