Strategic reserves are running low, and geopolitical crises are exacerbating the risk of renewed global inflation.
2026-08-12 02:00:55
The global crude oil market has flashed warning signs of renewed inflation: the six-month-long US-Iran conflict has severely disrupted shipping in the Strait of Hormuz; US Strategic Petroleum Reserve (SPR) inventories have fallen to multi-decade lows; and international crude oil prices are approaching key technical levels. Currently, other markets lack short-term positive factors to offset these risks, and with multiple risks compounding, gasoline prices may rise, US Treasury yields may increase, and stock market volatility may intensify in the coming weeks. 
On Monday evening, President Trump issued a strong statement demanding that Iran compensate "all those killed or seriously injured" by Iran. This followed Iran's conditions for resuming navigation in the Strait of Hormuz: lifting the US maritime blockade, rescinding sanctions, and the US paying war reparations. The two sides remained at loggerheads, dashing market hopes for a swift reconciliation after a brief market recovery last week. Furthermore, the Houthi rebels, supported by Iran, continued attacks on Saudi-related facilities in the Red Sea, further amplifying market uncertainty. International benchmark crude oil—Brent crude futures for October delivery—recently touched $90 per barrel, with weekly gains reaching as high as 13% at one point during the session, currently trading between $87 and $90 per barrel. West Texas Intermediate (WTI) crude for September delivery, directly linked to US gas station retail prices, has seen a cumulative increase of over 10% in the past week, and is now more than 25% higher than at the beginning of the conflict in late February. Shipping data vividly confirms the tightening supply: the number of ships navigating the Strait of Hormuz is only a fraction of pre-war levels, with an average of about 130 ships per day before the war, and a recent low of just 6 ships per day, with a 10-day average of about 11 ships; in the latest statistical period, the average daily net export volume of crude oil and refined products was only 3 million barrels. Warren Paterson, head of commodities strategy at ING, said, "The ongoing geopolitical stalemate in the Strait of Hormuz is providing strong support for oil prices." Trump stated that the US is in a "semi-negotiating" state, mainly relying on economic pressure, but significant obstacles remain to reaching a comprehensive agreement. Analysts from Jefferies and other investment banks warned that if the standoff continues into next week or even longer, the market's buffer of absorbing the supply gap through inventory depletion will be exhausted; a sharp rise in oil prices, leading to demand destruction, will become inevitable—if OECD oil inventories continue to be depleted rapidly, oil prices may reach a critical point in the fourth quarter, surging to the $120-$140/barrel range. The US emergency oil reserves are nearing their limit. Data from the U.S. Department of Energy shows that strategic petroleum reserves fell by 6.1 million barrels last week, bringing the total to 298.7 million barrels, a new low since early 1983, less than half of the maximum storage capacity of 714 million barrels. In March, reserves were close to 415 million barrels. The Trump administration's plan to release reserves in coordination with the International Energy Agency (IEA) has been approved to release a total of 172 million barrels, of which more than 116 million barrels have been released so far. With limited available reserves at present, and given the continued blockade of the Strait of Hormuz and the uncertainty surrounding a reconciliation agreement, the U.S.'s buffer against a new round of supply shocks has been significantly thinned. Henry Allen, a macro strategist at Deutsche Bank, pointed out: "Since the outbreak of the conflict, shipping volumes in the Strait have been far below pre-war levels for six consecutive months." Global trade tariff barriers remain a long-term issue, and a strong El Niño event later this year may further push up food and energy prices. "Currently, inflation risks are compounded, and the energy market is experiencing significant volatility. However, investors are generally betting that inflation will be moderately controlled, a view that is clearly biased." U.S. gasoline inventories have fallen to multi-year lows, exacerbating domestic refined oil price increases. The latest data from the American Automobile Association (AAA) and the Energy Information Administration (EIA) shows that the average price of regular gasoline across the U.S. remains above $4 per gallon, with all types of gasoline priced between $4.00 and $4.14 per gallon, representing year-on-year increases of 25% to 28% in most regions. Patrick DeHan, an analyst at the fuel information platform GasBuddy, warns that the Strait of Hormuz remains effectively blocked, and upward pressure on fuel prices could quickly return; if the situation continues to deteriorate, the average gasoline price across the U.S. may break historical records for the same period later this year. This supply and demand dynamic will significantly boost U.S. inflation data. The market initially expected a slight decline in July inflation data, but it would still be well above the Federal Reserve's 2% inflation target, a hard target that new Fed Chairman Kevin Warsh has repeatedly reiterated. Following the recent interest rate decision, Warsh told the media, "Persistent high inflation has created a misconception in the market that the Fed has an easing inflation target higher than 2%. I want to reiterate: the Fed does not have an easing target; its only inflation target is 2%." He emphasized that the Fed cannot tolerate persistently high inflation and will adhere to its core policy of price stability. Stephen Coltman, head of macro at 21Shares, analyzed that if the conflict continues into the fall, and negotiations stall, leading to an escalation of the situation, rising oil and gasoline prices will severely disrupt the Fed's inflation target. The Trump administration faces a dilemma: escalate military pressure to open the Strait of Hormuz, or maintain the status quo and hope that economic sanctions will force Iran to concede. With the midterm elections approaching, rising oil prices will significantly increase Trump's political costs, and the strategic petroleum reserve cannot be released indefinitely. "The risk of a sharp surge in crude oil prices is real and cannot be ignored," said Koltmann. Analysts from multiple institutions simultaneously issued risk warnings: Ole Hansen of Saxo Bank pointed out that there is still no clear path to a full resumption of navigation in the Strait of Hormuz, and the problem of crude oil supply disruptions continues to escalate; Barclays tracking data confirms a precipitous decline in net crude oil exports from the Strait of Hormuz; analysts from Capital.com and SEB stated that the US and Iran are mutually demanding compensation, with Iran insisting that the shipping agreement brokered by Oman must include a clause for complete US concessions, which is politically unacceptable to Trump, who is preparing for the election. Multiple monitoring data show that Iranian crude oil shipments were almost zero in early August, and floating storage crude oil inventories continued to rise. Although occasional rumors of easing tensions have boosted optimism, multiple structural constraints remain unresolved: emergency storage buffers are depleted, shipping to the two major energy chokepoints, the Strait of Hormuz and the Bab el-Mandeb Strait, is disrupted, and multiple potential price increase risks, coupled with trade tariffs and extreme weather, make a renewed acceleration of inflation an imminent and real threat. If the energy market continues to experience sharp fluctuations, investors currently betting on manageable inflation may be forced to revise their expectations.
On Monday evening, President Trump issued a strong statement demanding that Iran compensate "all those killed or seriously injured" by Iran. This followed Iran's conditions for resuming navigation in the Strait of Hormuz: lifting the US maritime blockade, rescinding sanctions, and the US paying war reparations. The two sides remained at loggerheads, dashing market hopes for a swift reconciliation after a brief market recovery last week. Furthermore, the Houthi rebels, supported by Iran, continued attacks on Saudi-related facilities in the Red Sea, further amplifying market uncertainty. International benchmark crude oil—Brent crude futures for October delivery—recently touched $90 per barrel, with weekly gains reaching as high as 13% at one point during the session, currently trading between $87 and $90 per barrel. West Texas Intermediate (WTI) crude for September delivery, directly linked to US gas station retail prices, has seen a cumulative increase of over 10% in the past week, and is now more than 25% higher than at the beginning of the conflict in late February. Shipping data vividly confirms the tightening supply: the number of ships navigating the Strait of Hormuz is only a fraction of pre-war levels, with an average of about 130 ships per day before the war, and a recent low of just 6 ships per day, with a 10-day average of about 11 ships; in the latest statistical period, the average daily net export volume of crude oil and refined products was only 3 million barrels. Warren Paterson, head of commodities strategy at ING, said, "The ongoing geopolitical stalemate in the Strait of Hormuz is providing strong support for oil prices." Trump stated that the US is in a "semi-negotiating" state, mainly relying on economic pressure, but significant obstacles remain to reaching a comprehensive agreement. Analysts from Jefferies and other investment banks warned that if the standoff continues into next week or even longer, the market's buffer of absorbing the supply gap through inventory depletion will be exhausted; a sharp rise in oil prices, leading to demand destruction, will become inevitable—if OECD oil inventories continue to be depleted rapidly, oil prices may reach a critical point in the fourth quarter, surging to the $120-$140/barrel range. The US emergency oil reserves are nearing their limit. Data from the U.S. Department of Energy shows that strategic petroleum reserves fell by 6.1 million barrels last week, bringing the total to 298.7 million barrels, a new low since early 1983, less than half of the maximum storage capacity of 714 million barrels. In March, reserves were close to 415 million barrels. The Trump administration's plan to release reserves in coordination with the International Energy Agency (IEA) has been approved to release a total of 172 million barrels, of which more than 116 million barrels have been released so far. With limited available reserves at present, and given the continued blockade of the Strait of Hormuz and the uncertainty surrounding a reconciliation agreement, the U.S.'s buffer against a new round of supply shocks has been significantly thinned. Henry Allen, a macro strategist at Deutsche Bank, pointed out: "Since the outbreak of the conflict, shipping volumes in the Strait have been far below pre-war levels for six consecutive months." Global trade tariff barriers remain a long-term issue, and a strong El Niño event later this year may further push up food and energy prices. "Currently, inflation risks are compounded, and the energy market is experiencing significant volatility. However, investors are generally betting that inflation will be moderately controlled, a view that is clearly biased." U.S. gasoline inventories have fallen to multi-year lows, exacerbating domestic refined oil price increases. The latest data from the American Automobile Association (AAA) and the Energy Information Administration (EIA) shows that the average price of regular gasoline across the U.S. remains above $4 per gallon, with all types of gasoline priced between $4.00 and $4.14 per gallon, representing year-on-year increases of 25% to 28% in most regions. Patrick DeHan, an analyst at the fuel information platform GasBuddy, warns that the Strait of Hormuz remains effectively blocked, and upward pressure on fuel prices could quickly return; if the situation continues to deteriorate, the average gasoline price across the U.S. may break historical records for the same period later this year. This supply and demand dynamic will significantly boost U.S. inflation data. The market initially expected a slight decline in July inflation data, but it would still be well above the Federal Reserve's 2% inflation target, a hard target that new Fed Chairman Kevin Warsh has repeatedly reiterated. Following the recent interest rate decision, Warsh told the media, "Persistent high inflation has created a misconception in the market that the Fed has an easing inflation target higher than 2%. I want to reiterate: the Fed does not have an easing target; its only inflation target is 2%." He emphasized that the Fed cannot tolerate persistently high inflation and will adhere to its core policy of price stability. Stephen Coltman, head of macro at 21Shares, analyzed that if the conflict continues into the fall, and negotiations stall, leading to an escalation of the situation, rising oil and gasoline prices will severely disrupt the Fed's inflation target. The Trump administration faces a dilemma: escalate military pressure to open the Strait of Hormuz, or maintain the status quo and hope that economic sanctions will force Iran to concede. With the midterm elections approaching, rising oil prices will significantly increase Trump's political costs, and the strategic petroleum reserve cannot be released indefinitely. "The risk of a sharp surge in crude oil prices is real and cannot be ignored," said Koltmann. Analysts from multiple institutions simultaneously issued risk warnings: Ole Hansen of Saxo Bank pointed out that there is still no clear path to a full resumption of navigation in the Strait of Hormuz, and the problem of crude oil supply disruptions continues to escalate; Barclays tracking data confirms a precipitous decline in net crude oil exports from the Strait of Hormuz; analysts from Capital.com and SEB stated that the US and Iran are mutually demanding compensation, with Iran insisting that the shipping agreement brokered by Oman must include a clause for complete US concessions, which is politically unacceptable to Trump, who is preparing for the election. Multiple monitoring data show that Iranian crude oil shipments were almost zero in early August, and floating storage crude oil inventories continued to rise. Although occasional rumors of easing tensions have boosted optimism, multiple structural constraints remain unresolved: emergency storage buffers are depleted, shipping to the two major energy chokepoints, the Strait of Hormuz and the Bab el-Mandeb Strait, is disrupted, and multiple potential price increase risks, coupled with trade tariffs and extreme weather, make a renewed acceleration of inflation an imminent and real threat. If the energy market continues to experience sharp fluctuations, investors currently betting on manageable inflation may be forced to revise their expectations.
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