The commodities feed: Oil market shrugs off Persian Gulf escalation

The oil market has seen only modest gains this morning despite the re-escalation between the US and Iran over the weekend. Even so, we continue to believe the market is too optimistic about the timeline for a recovery in Persian Gulf supplies.

Energy – Speculators continue to sell Oil

Renewed US–Iran tensions failed to materially lift oil prices. The two sides exchanged strikes over the weekend after attacks on vessels transiting the Strait of Hormuz, but have since agreed to pause hostilities ahead of another round of talks in Qatar later this week. Meanwhile, the Joint Maritime Information Centre raised its threat assessment for vessels navigating the Strait of Hormuz to “substantial”. The oil tanker trade group, Intertanko, told its members to avoid sending tankers through the Strait of Hormuz, if possible. Oman also reportedly told European officials that there’s no going back to a pre-war environment in the Strait of Hormuz – and that vessels transiting the strait may have to pay some fees.

All this demonstrates that there’s still plenty of risk facing the oil market. Even so, participants appear to be shrugging off these developments, instead focusing on what a continued recovery in oil flows would mean for the global balance. This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow – or if we see significant re-escalation. While the oil market is technically in oversold territory, momentum appears to still be to the downside.

The latest positioning data shows that speculators reduced their net long in ICE Brent by 23,790 lots over the last reporting week, leaving them with a net long of 90,338 lots as of last Tuesday. This is the smallest position that speculators have held since mid-December 2025, when the market was fully focused on the 2026 surplus expectations. The move over the week was driven by longs liquidating, with them selling 52,097 lots, while there was also a smaller share of short covering.

The gasoil crack continues to find good support. Noise around the potential for Russia to temporarily ban diesel exports is building amid a fuel shortage in the country following continued Ukrainian attacks on Russian energy infrastructure. Russia is a substantial diesel supplier, exporting around 900k b/d. Russia’s deputy prime minister said that any restriction on diesel exports will be short-term. This will still impact the middle distillates market, which has tightened significantly during the Iranian war. The threat of a ban is likely to keep middle-distillate cracks elevated.

Agriculture – Wheat falls on improving crop prospects

CBOT wheat prices declined last week, falling by more than 4.5%, amid improving global supply expectations and favourable weather across key US growing regions. The International Grains Council’s upward revision of its 2026/27 global wheat production forecast to 821mt further reinforced the outlook for ample supplies. US rainfall in parts of the Great Plains alleviated drought concerns and supported crop prospects. Market participants also remained cautious ahead of the USDA’s acreage and quarterly grain stocks report. It's expected to provide additional downside signals for wheat.

While an intense heatwave across parts of Europe is providing some support by threatening yields in a key wheat-producing region, overall crop conditions remain stable. Data from France’s Agriculture Ministry shows that 74% of the soft wheat crop was rated good to excellent as of 22 June. This is down slightly from 76% the previous week but above 68% recorded a year earlier amid dry conditions in Western Europe. Harvesting has also begun, with 7% of the crop collected as of last Monday, ahead of last year’s pace.

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