Quick overview
Crude oil prices moved sharply higher at the start of the week as escalating Middle East tensions and continued disruptions around the Strait of Hormuz outweighed OPEC+’s decision to increase production.
Oil Rises Despite OPEC+ Supply Increase
Crude oil opened the week with strong gains, with WTI crude futures climbing nearly $3 to around $93.50 per barrel. The advance came despite OPEC+ announcing another production increase, highlighting that geopolitical risks continue to dominate the market over changes in official supply quotas.
The producer group confirmed it will raise output by 188,000 barrels per day in July and plans to hold another meeting on July 5 to determine production levels for August. Under normal circumstances, higher production would be expected to weigh on oil prices by increasing global supply.
However, traders remain focused on the much larger supply disruption caused by the ongoing situation in the Strait of Hormuz, where an estimated 10 to 13 million barrels per day remain effectively shut in. As long as this key shipping route remains heavily disrupted, incremental production increases from OPEC+ are unlikely to offset supply concerns.
Hormuz Remains the Market’s Biggest Concern
The Strait of Hormuz continues to be the primary driver of oil prices as uncertainty surrounding the waterway shows little sign of easing.
Diplomatic negotiations between the United States and Iran remain deadlocked over sanctions relief, frozen Iranian assets, and broader nuclear issues. President Trump reiterated over the weekend that the United States would not release frozen Iranian assets or lift sanctions before meaningful progress is made in negotiations.
Iran, meanwhile, maintained that key issues must be resolved before discussions surrounding the reopening of Hormuz can move forward, leaving traders increasingly concerned that the disruption could persist.
Weekend Escalation Adds to Supply Fears
Geopolitical tensions intensified over the weekend after renewed military exchanges between Israel and Iran.
Following Israeli strikes on Beirut’s southern suburbs, Iran launched missile attacks targeting Israel and warned that broader military action could follow if additional strikes occur. The exchange heightened concerns that regional instability could spread further across the Middle East.
Despite the escalation, President Trump continued to advocate for diplomacy. He stated that he remains close to securing an agreement with Iran and urged both sides to avoid further retaliation, emphasizing that additional military action could derail ongoing negotiations.
His comments offered some optimism that diplomatic efforts remain active, although investors remain cautious given the fragile security situation.
Market Focus Remains on Supply Risks
Friday’s decline in oil prices briefly pushed WTI toward $90.50 per barrel, but sentiment shifted quickly as markets reopened following the weekend developments.
The rebound above $93 reflects investors’ continued focus on the possibility of prolonged supply disruptions rather than the relatively modest increase in OPEC+ production.
As long as uncertainty surrounds the Strait of Hormuz and tensions remain elevated across the Middle East, geopolitical developments are likely to remain the dominant driver of oil prices. While diplomatic efforts continue, markets are expected to remain highly sensitive to any signs of either military escalation or meaningful progress toward reopening one of the world’s most important energy shipping routes.
Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.