The new round of military conflict between the United States and Iran continues to intensify, and hedge funds are betting on further oil price gains with their most aggressive positioning since May. Weekly options and futures data released by Intercontinental Exchange (ICE) Futures Europe show that in the week ended September 1, fund managers increased net long positions in Brent crude by 37,837 lots to 261,435 lots, the highest level in more than three months. Meanwhile, data from the U.S. Commodity Futures Trading Commission (CFTC) also shows that net long crude oil positions have climbed to their highest point since June.
Behind this expansion in positioning is a sharp escalation in market concerns that energy shipments through the Strait of Hormuz could face prolonged disruption. The United States has continued bombing operations against Iranian targets this week, while Iran has retaliated by attacking U.S. military bases and has begun striking vessels transiting the Strait of Hormuz. Shipping activity through the strait had previously shown signs of gradual recovery, but the situation has now deteriorated rapidly.
Oil Prices Surge for the Week as Brent Approaches $96
As of Friday, Brent crude futures rose 0.35%, bringing the weekly gain to 8.8% at $95.85 per barrel, breaking above the interim high set on July 24. West Texas Intermediate (WTI) was trading near $92 per barrel, up more than 9% for the week, with both benchmarks on track for their largest weekly gains since mid-July.
Brent crude has risen nearly 60% year-to-date, with refined products such as diesel posting even steeper gains. Simultaneous wars in the Middle East and Ukraine are further squeezing global fuel supplies. Net long positions in diesel have climbed to their highest since March, and U.S. retail diesel prices hit a record high of $5.85 per gallon on Thursday. Net long positions in gasoline surged to 89,263 lots, the highest since December last year, as traders have never been this bullish on gasoline at this point in the year, with gasoline prices currently near their highest September levels on record.
Dual Chokepoint Risks Compound as Transit Volumes Plunge
Market participants note that two major maritime chokepoints are now creating compounding risks. On September 1, commodity data provider Kpler monitored only four commodity-carrying vessels transiting the Strait of Hormuz, well below the 10-day average of approximately 13. The Bab el-Mandeb saw only 18 vessels pass through the same day, down from a 10-day average of roughly 24. Before the conflict, total daily transit volume through the Strait of Hormuz averaged approximately 130 to 140 vessels, and at the height of the crisis, volumes fell to below 10% of normal levels.
The Strait of Hormuz restricts energy exports from the Persian Gulf, while the Bab el-Mandeb threatens the alternative route from Saudi Arabia’s western ports via the Red Sea and Suez Canal. Simultaneous disruption at both chokepoints would significantly erode the flexibility of global energy supply chains to reroute shipments, driving up maritime freight costs along with crude oil, refined product, and natural gas prices.
Iran has expanded its list of vessels deemed “non-compliant,” which face fines, confiscation, or seizure if they attempt to transit the strait. Iraqi vessels are among the few granted passage through Hormuz by Tehran. Two Iraqi energy officials revealed that Iraq’s oil exports rose from approximately 1.35 million barrels per day in July to about 2.34 million barrels per day in August, with September exports expected to increase further.
U.S. Vice President JD Vance sought to downplay the scale of the conflict, telling reporters on Thursday that he would not characterize the current situation as a war since large-scale combat operations concluded weeks ago. However, he made clear that Washington does not intend to enter negotiations with Iran unless Tehran ceases attacks on commercial shipping in the Strait of Hormuz.
Republican Representative Pat Harrigan of North Carolina, a member of the House Armed Services Committee, offered a different assessment, stating bluntly that “from a military standpoint, we are clearly in a situation of combat difficulties and stalled negotiations.”
Israeli Defense Minister Israel Katz issued another warning, saying Israel would “paralyze” Iran’s military and civilian infrastructure, including energy facilities. Iran has launched multiple rounds of missiles at Jordan, Kuwait, and Bahrain, and the risk of the region sliding back into a cycle of military escalation continues to rise.
Priyanka Sachdeva, head of futures market insights at Phillip Nova Pte Ltd. in Singapore, said the oil market is “reassessing its own vulnerability.” She noted: “When fundamental energy transportation and shipping security issues remain unresolved, risk premiums can only be compressed for a limited period.”
Mixed Supply Signals as Shipping Costs Soar
Despite ongoing hostilities in the Middle East, some crude oil continues to flow out of the Persian Gulf through the Strait of Hormuz. U.S. officials said this week that shipping volumes in the region remain robust under U.S. naval escort. Saudi Arabia also kept the selling price of its flagship crude unchanged for next month, which the market interpreted as a possible sign that supply tightness has eased somewhat.
The rise in global shipping costs stems primarily from effective vessel supply contraction, longer voyage distances, and war risk insurance, rather than any sudden surge in global oil consumption. At the outset of the US-Iran war, daily charter rates for Middle East-China very large crude carriers (VLCCs) reached a record $423,736. While rates have since retreated, forward freight rates for the fourth quarter of 2026 remain around $181,163 per day, more than double the $86,314 per day for the U.S. Gulf Coast-China route.
Additional war risk insurance premiums for Hormuz transits rose from 1% to 3% of hull value in July to 7.5% to 10%. Senior maritime shipping experts estimate that certain Red Sea cargoes forced to reroute could add approximately 10,000 nautical miles, 34 days of voyage time, and over $5 million in freight costs, not including fuel and insurance expenses.
Asian spot liquefied natural gas prices rose this week to their highest level in more than three years, with elevated costs putting pressure on demand and budgets in some countries across the region.
Inventory and Policy Support
Oil prices are also supported by tightening inventories. U.S. Energy Information Administration (EIA) data shows that in the week ended August 28, U.S. commercial crude inventories fell to approximately 424.5 million barrels, down from 428.9 million barrels the prior week. The U.S. Strategic Petroleum Reserve stood at approximately 286.6 million barrels.
OPEC+ supply policy is also in focus. Market sources indicate that the producer group is expected to maintain its October production policy unchanged at its Sunday meeting. The group is completing the unwinding of a round of production cuts, but shipping disruptions in the Strait of Hormuz have diminished the influence of its output decisions on prices.
Citi has raised its third-quarter average Brent crude price forecast from $80 to $86 per barrel, citing that the strait’s reopening is taking longer than previously expected. Analysts at ANZ have also raised their near-term Brent target to $95 per barrel, arguing that further escalation in the Middle East conflict poses upside risks to prices.
For investors, energy equities, tanker shipping, and refining margins continue to benefit from geopolitical risk premiums, though a significant portion of this represents “fear pricing.” If strait transit conditions continue to improve, these premiums could compress rapidly. Conversely, if conditions at both the Strait of Hormuz and the Bab el-Mandeb deteriorate simultaneously, oil prices, global inflation, and long-term government bond yields could face a new round of upward shocks.