US-Iran Strait of Hormuz Oil Prices: The 2026 Conflict Explained
Brent front-month printed $72.49 on July 3, per IRU. Term structure inverted against pre-conflict geometry. August contract now trades at discount to September — backwardation unwound. Geopolitical premium extracted from the front of the curve.
Term structure and curve repricing
Pre-MoU curve carried steep M1-M2 backwardation. Spread priced supply scarcity through the maritime chokepoint. Post-June 17 structure prints flat-to-contango across the front three months. Short-dated scarcity premium removed from futures pricing. Vol surface followed: implied vol compressed across the front, skew flattened, tail risk repriced. Wood Mackenzie's pre-MoU $200 scenario priced out of far-dated OTM calls. Put-call skew normalized.
Curve recovery remains conditional. Tactical strikes continue in the Strait. Demining operations ongoing per stl.news. Naval evacuation pauses intermittent. Shipping throughput is the binding variable for forward curve repricing. Insurance war risk premiums compressed but not normalized. Recovery slope tied to demining completion timelines.
Regulatory and product spread mechanics
U.S. Treasury deployed General License X. Time-limited sanctions relief. Mechanism: restore Iranian crude flow to spot pricing. Market reads as temporary supply addition, not structural reset. Crack spreads responded asymmetrically. European diesel margins widened after fuel-tax relief measures lapsed in Germany and Spain, per IRU dated July 3. Distillate cracks outperformed gasoline. Product-to-crude ratio rotated toward middle distillates, decoupling from crude trajectory.
Levels and expiry calendar
Brent resistance: $75. Support: $70. Term structure is the primary signal. Re-steepening of M1-M2 spread indicates positioning pivot back toward tightness. Key expiries: July 18 WTI, July 25 Brent. Gamma exposure concentrated near the $72 strike. July 18 WTI will test gamma pinning around $72. July 25 Brent max pain sits between $70–$73. Watch list: contango persistence, August open interest trajectory, shipping throughput data, any reversal of General License X.