The commodities feed: Oil higher as US-Iran deal hopes fade

ING Global Economics Team ING Economic and Financial Analysis

Oil prices are trading stronger as optimism over a US-Iran deal fades, leaving the market to reprice ongoing supply disruptions.

Energy - Middle distillate tightness concerns grow

By this point, you’d think markets would be largely immune to headlines about a US–Iran deal. The pattern keeps repeating — initial enthusiasm when negotiations appear promising, only for that optimism to dissipate just as quickly. Yet the oil market remains very headline-driven, which leaves prices whipsawing. The latest bout of optimism is quickly fading, with demands for war reparations from Iran, which President Trump rejected. Trump instead insists that Iran pay reparations for the deaths of US soldiers as well as Iranian civilians over the last few decades. Current rhetoric suggests any potential deal is still some way off, meaning risks remain skewed to the upside for oil prices.

Oil continues to move through the Strait of Hormuz even as disruptions persist, underscoring the market’s ability to keep flows moving despite periodic turbulence. According to reports, Iraq’s state oil marketing company said oil shipments are around 2m b/d in August. If this is the case, a number of vessels would be navigating the strait with transponders turned off, given that observed tanker crossings are minimal. Prior to the war, Iraq was exporting around 3.4m b/d of oil through the Strait of Hormuz.

Middle distillates saw renewed strength yesterday, with the ICE gasoil crack surging above $70/bbl at one stage, after further Houthi attacks on the 400k b/d Jazan refinery in Saudi Arabia. The refinery had already suspended operations due to a previous attack. The latest incident will reportedly see the refinery restart operations at the end of August. This will clearly only add to supply concerns for refined product markets, particularly middle distillates. The outlook for gasoil will depend largely on how events in the Middle East and Russia play out. With tight stocks heading into the Northern hemisphere winter, it’s clear that gasoil cracks will remain at seasonally elevated levels.

Fading optimism over a potential deal between the US and Iran has also seen European natural gas prices surge higher once again. TTF settled more than 9% higher yesterday, taking it back above EUR60/MWh. Every day that goes by without a resumption of Persian Gulf LNG flows leaves the market more vulnerable as we head closer towards the 2026/27 heating season. The state of storage in Europe is becoming a bigger worry. Gas storage is now below 2021 levels both in terms of percentage full and in absolute terms. The EU’s lower storage target of 75% ahead of the winter is looking as though it will be tough to hit. This will leave the market vulnerable to price spikes through the heating season.

Agriculture – Supply tightness lifts sugar to 10-month high

Sugar prices remained near their highest level since October 2025, following their largest weekly gain since 2024 — supported by tightening global supply conditions. Europe's sugar production is expected to decline to a multi-year low, while potential El Niño-related disruptions to cane production in India and Thailand continue to bolster market sentiment. Speculators reduced their net short position by 34,599 lots to 77,814 lots, driven primarily by short covering. Gross short positions declined by 19,413 lots to 274,809 lots.

Favourable weather conditions in the Ivory Coast are helping cocoa farmers prepare plantations ahead of next month’s main harvest. Meanwhile, rainfall has returned to Cameroon and Nigeria, improving crop conditions and supporting fresh flowering. This is despite some losses of young flowers and pods. In Ghana, favourable weather has supported crop development throughout the season. Limited sunshine is beginning to raise concerns over the spread of black pod disease.

First estimates from Ukraine’s Agriculture Ministry show that grain exports could decline to 38mt—40mt in the 2026/27 marketing season, down about 12% from an earlier projection of 43mt. The revision is largely attributed to persistent Russian attacks on Odesa’s port infrastructure and disruptions to Black Sea shipping routes.

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ING Global Economics Team

ING Economic and Financial Analysis

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