Shelling in Hormuz Pushes Brent Crude Back to $83! Energy Corridor Risk Premium Heats Up Again as Oil Bulls Regain Pricing Power

According to Zhitong Finance APP, following media reports that Iran attacked “hostile targets” in the Strait of Hormuz, the international crude oil price benchmark—Brent crude oil futures—continued its upward momentum. Meanwhile, Tehran is seeking, under the preliminary Strait of Hormuz management agreement reached with Oman, to ban ships of hostile nations, including the United States, from entering this key waterway.

Brent crude oil futures prices rose again above the critical bullish technical level of $83 per barrel after surging nearly 4% in the previous trading day; North America's crude oil price benchmark—West Texas Intermediate (WTI) crude—was close to $78 per barrel. According to the semi-official Fars News Agency, the attack occurred on Thursday night local time, following an earlier explosion near Qeshm Island in the Strait of Hormuz.

As shown in the image above, oil prices rose again as Iran attacked hostile shipping targets in the Strait of Hormuz—Tehran intends to ban US vessels from passing through, significantly narrowing crude oil futures’ losses for the week.

As of Friday morning, the Middle East situation presents a contradictory state of “ongoing negotiations with rising navigation risks.” The new navigation arrangement discussed between Iran and Oman aims to restrict US and Israeli vessels from entering the Strait of Hormuz and may impose penalties of up to 20% of the cargo value on violating ships. Oman is considering a transit fee of about 3%; the US insists on restoring pre-war free and unobstructed navigation, and both sides remain far from consensus on core terms.

Meanwhile, after the explosion near Qeshm Island, Iran claimed responsibility for attacking "hostile targets" in the Strait; Houthi forces also launched large-scale missile and drone attacks on Yemen’s pro-Saudi troops and extended their threats to Saudi oil tankers, the Gulf of Aden, and Red Sea routes. Iran further warned that if the United States resumes large-scale strikes, oil fields, power grids, water facilities, and transportation infrastructure in Gulf countries may suffer retaliation. This means Middle East geopolitical risks are still evolving from a single chokepoint blockade to large-scale regional threats covering production, refining, and transportation nodes in the energy sector.

Iran Plans to Ban US and Israeli Vessels, Crude Oil Bulls Regain Pricing Power! Energy Corridor Risk Premium Spikes Again

As optimism fades over the full reopening of the Strait of Hormuz and the recovery of Persian Gulf energy transport, crude oil has recouped some of its earlier losses this week. Under the proposed Iran–Oman agreement, Tehran also plans to prohibit Israeli ships from passing through the strait and require hostile nations to pay compensation before being allowed access to the waterway.

Rob Haworth, Senior Investment Strategist at US Bank Asset Management Group, said: "A deal to reopen the Strait of Hormuz still seems out of reach, and investors are swinging between uncertainty and risk. For now, shipping volumes remain low and a durable agreement is not yet in sight."

Although US President Donald Trump again stated he believes the war will end "soon" and said that progress on the strait issue is going "smoothly," major differences over terms persist among the conflicting parties. The US insists that vessels must be able to pass freely and restore prewar conditions, while Iran pushes for a fee-based mechanism.

Conflict in the Middle East appears to be escalating. Iran-backed Houthis claim to have launched a “large-scale” attack on government forces loyal to Saudi Arabia in Yemen. Earlier this week, the group claimed to have attacked a Saudi oil tanker in the Gulf of Aden and threatened shipping activities in the northern Red Sea.

In terms of price movements, Brent crude oil futures for October delivery rose 1.4% to $83.61 per barrel as of 8:15 a.m. Singapore time. West Texas Intermediate (WTI) crude oil futures for September delivery rose 1.2% to $78.24 per barrel.

Even with the Strait Reopened, Refined Product Shortage Persists—Refining Takes Over Energy Pricing Power

In the short term, international oil prices are likely to maintain the typical pattern of “diplomatic news weighing down prices, military escalation driving them up,” with volatility outweighing clear direction. Brent crude oil fell to $79.36 per barrel on August 4 due to ceasefire and shipping resumption expectations, then rebounded to $83.48 by August 7 amid disputes over Hormuz navigation conditions and security incidents; WTI climbed from $75.77 to $78.84 during the same period. These figures demonstrate that the crude oil market is not currently in a stable one-way bull trend, but is continually repricing the risk premium based on actual shipping volume through the strait, insurance availability, and the probability of a US-Iran agreement.

As long as shipping through Hormuz remains significantly below prewar levels, there will be strong geopolitical support for Brent prices on the downside. If attacks escalate to oil fields, ports, or critical routes, oil prices could jump sharply. However, once an unconditional free passage agreement is reached, crude oil’s risk premium will fade faster than that on refined products.

Even if crude oil prices fall back due to negotiations, diesel and jet fuel prices are more likely to "drop slowly, rebound quickly," with refining margins remaining sticky at high levels. According to some veteran energy sector analysts, refined product prices for the refining segment are likely to show more resilience than crude over the coming weeks—diesel and jet fuel typically outperform gasoline.

The fundamental reason is that reopening the Strait of Hormuz first solves the issue of whether crude oil can be exported, but cannot immediately restore lost refining capacity, refined product inventories, and logistical networks. Russian diesel exports have sharply declined, refineries have suffered attacks, Middle East product exports are disrupted, and China’s exports are restricted. When combined with long-term high refinery utilization and delayed maintenance, this creates a structural bottleneck harder to fix than crude oil supply. In July, the US 3-2-1 crack spread hit a record $64.58 per barrel; European diesel crack spread exceeded $60; European gasoline’s premium over crude was around $41. BP’s global refining profit indicator averaged about $42 so far in Q3, clearly above $30 in Q2 and $12 a year ago.

The more certain current strategy is not simply to go long on crude oil, but to long the scarcity of refined products and the cash flow elasticity of high-quality refining assets. This highlights the resilience of refined product prices and higher visibility of refining profits compared to crude price trends, though reversal risks for asset prices are highly concentrated around the single switch— a peace agreement. During this period, US refiners can often fill the global diesel and gasoline shortfall with flexible feedstock sources and export capacity. Companies such as Phillips 66 and Valero, focused solely on refining, are typically more sensitive to crack spread profits than integrated oil majors. ExxonMobil, Chevron, and Saudi Aramco balance geopolitical exposure via "upstream crude oil prices + downstream profits."