Oil on Pace for 21% Monthly Rally as US-Iran War Strains Supply

An oil pumpjack at the Inglewood Oil Field in Culver City, California, US, on Monday, May 4, 2026. With the US-Iran war creeping into its third month, oil traders are hedging against divergent outcomes tied to US inventories as the newly anointed top crude exporter faces unprecedented pressure to meet global demand. Photographer: Kyle Grillot/Bloomberg Photo by Kyle Grillot /Bloomberg

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(Bloomberg) — Oil steadied at the end of a volatile week, with prices on track for the biggest monthly gain since March as the US-Iran war escalated.

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West Texas Intermediate held near $84 a barrel after swinging in a range of more than $8 this week. For the month, the US crude marker has soared by about a fifth. Brent settled around $89 a barrel in the previous session.

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While the US and Iran again exchanged strikes on Thursday, shipping through the Strait of Hormuz appears to have picked up in recent days. Meanwhile, Saudi Arabia discussed with representatives of 43 countries forming an alliance to protect navigation in and around the Red Sea, hoping to counter a blockade the Iran-backed Houthi militants imposed on the kingdom last week.

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In a televised speech on Thursday, Houthi leader Abdulmalik al-Houthi said there were indications the Saudis were heading toward “comprehensive escalation,” which he said would be met with a fiercer campaign. Apart from strikes on tankers, the group recently claimed attacks on oil facilities.

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Energy markets have roared higher in July, with double-digit percentage gains for oil as well as products such as diesel. This month, a fragile pause in hostilities between Washington and Tehran collapsed, the Yemen-based Houthis entered to fray, and Saudi Arabian forces joined the US to strike Iran-backed groups in Iraq. US stockpiles have continued to draw.

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After starting the war with Israel in late February to challenge Tehran’s nuclear program, US President Donald Trump is once again facing a conundrum of whether to escalate the conflict further in retaliation for Iran’s attacks on US assets, or focus on calming turmoil in global energy markets.

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“It’s a real wait-and-see to see if this is going to expand, and if the US is going to retaliate in the way that Trump is threatening or if this is going to be kind of a tit-for-tat but on a relatively smaller scale,” said Carolyn Kissane, associate dean at New York University’s Center for Global Affairs.

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Beyond the Middle East, traders are also concerned about supply snarls in the Black Sea. Loadings at the terminal vital to Kazakhstan’s crude exports were halted again this week after fresh tanker attacks. Nine vessels have now been attacked at or bound for the Caspian Pipeline Consortium facility this month alone, the most since Russia’s invasion of Ukraine in 2022. 

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The International Monetary Fund still sees a risk the Middle East oil shock could tip the global economy into recession, although the impact would be modest if Hormuz reopens soon, according to Managing Director Kristalina Georgieva.

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“Our prediction is that while the war is going on WTI will be in the $80-to-$100 range,” said Jay Hatfield, chief executive officer of Infrastructure Capital Management LLC. “If the war ends, we’ll be kind of $50-to-$60.”

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