Oil Market: Geopolitical De-escalation Crushes Prices
Global oil prices are experiencing the sharpest reassessment since the beginning of the year. Brent is trading around $79–80 per barrel, while US WTI is approximately $75–76. Just at the end of July, the international benchmark was above $90 amid attacks on tankers in the Persian Gulf; however, Washington's decision to postpone military operations against Iran and initiate direct negotiations reversed the market downward. Weekly declines in prices approached 10% — traders are quickly removing the "war premium" that had developed since spring.
Volatility remains extreme: on Wednesday, oil briefly rose following reports of Houthi attacks on a Saudi vessel in the Red Sea, reminding us that risks to maritime logistics are not limited to just the Hormuz Strait. Nevertheless, the dominant trend is a bet on de-escalation. Analysts warn that if negotiations fail, a return to prices of $90 and above could happen within hours.
The Hormuz Strait: Parameters of the Historic Agreement
A key event for the global oil and gas market is the interim agreement between the US, Iran, and Oman regarding the reopening of the Hormuz Strait, through which about 20 million barrels of oil and oil products passed daily before the crisis. The announcement of the deal was expected on Wednesday, August 5. The main parameters of the discussed scheme are as follows:
- Duration — 60 days with the possibility of extension; the regime aims to solidify the ceasefire and open the path for negotiations regarding Iran's nuclear program.
- Separate shipping routes: vessels entering the Persian Gulf will follow a northern corridor through Iranian territorial waters, while outgoing vessels will take a southern route through Omani waters.
- No transit fees: tariffs and passage fees will not be charged.
- De-mining of the main shipping channel within 30 days, after which a transition to permanent bilateral movement may occur.
For Bahrain, Iraq, Kuwait, and Qatar, lacking alternative export routes, the opening of the strait means the restoration of critically important flows of oil and LNG. At the same time, Washington emphasizes that if the agreement fails, military scenarios will be back on the negotiating table.
OPEC+: Alliance Completes Return of Voluntary Cuts
At a virtual meeting on August 2, the OPEC+ "Group of Seven" — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman — agreed to increase oil production in September by 188,000 barrels per day. This step concludes the alliance's return to the market of 1.65 million b/d that was cut as part of the second phase of voluntary restrictions starting from April 2023. Until the end of 2026, approved quotas will apply for participants without further reductions; the next monitoring meeting is scheduled for September 6.
The paradox of the current moment is that the Gulf countries physically could not meet their quotas due to the blockade of the Hormuz Strait. The opening of this key artery could quickly bring significant volumes back to the market, which would increase pressure on prices in the second half of the year — a factor that investors should incorporate into their models now.
Gas Market: Europe in the Race for LNG Before Winter
The European gas market remains the most strained segment of the global energy sector. The crisis in the Hormuz Strait has removed about one-fifth of global LNG supply from circulation, primarily from Qatar, intensifying competition between European and Asian buyers. The consequences are palpable:
- TTF hub quotes remain within the range of €56–59 per MWh — approximately 30% above the levels at the end of June;
- EU underground gas storage facilities (UGS) are filled to only 55–56% — the lowest level for this time of year in nearly two decades;
- Brussels has lowered the mandatory target filling level for UGS by November 1 from 90% to 80%, acknowledging supply constraints.
A hopeful signal was the first passage of a Qatari LNG tanker through the Hormuz Strait at the end of July since early July. If the agreement for the strait is implemented, the restoration of Qatari shipments could significantly cool gas prices and accelerate filling European storage. Otherwise, the market will begin to price in winter shortages in advance.
Refining: Global Deficit of Capacities and Fuel
The global oil refining sector is functioning under conditions of multiple shocks. Damage to refineries in the Middle East, strikes against refining infrastructure due to the Russia-Ukraine conflict, China's export restrictions on oil products, and Russia's ban on diesel exports combined have tightened global supply of motor fuel. Crack spreads remain elevated, supporting the margins of surviving plants, while European refiners diversify their raw material purchases, increasing in particular the imports of oil from Guyana, bypassing traditional Middle Eastern routes.
Russian Fuel Market: Export Restrictions Until 2027
The Russian government has extended the total ban on gasoline exports until January 31, 2027 — an unprecedented long-term restriction reflecting the depth of imbalance in the domestic market. The embargo on diesel exports remains in force at least until the end of August. Reasons for the tightening include:
- Increased drone attacks on Russian refineries since March, which have reduced motor fuel output;
- Seasonal demand during the vacation and harvesting period;
- The need to curb rising stock exchange and retail prices at gas stations.
The effect has already manifested in the diesel sector: exchange sales of summer diesel fuel on the SPbMTSB have doubled over the week, and the market is discussing the risk of surplus storage, which could force factories to reduce output — accompanied by a decrease in gasoline production. Regulators will need to balance between saturating the domestic market and maintaining the economics of refining.
Electricity and Renewable Energy: Renewables Consolidate Leadership
The global energy transition continues to set records. By the end of 2025, renewable energy sources will, for the first time in a century, surpass coal in the global electricity balance — 33.8% versus 33.0% of generation. In 2026, the trend is strengthening: in the US, during the first quarter, solar plants and storage systems accounted for 91% of all new capacities, and the renewable energy sector could attract up to $120 billion in investments per year. California's energy system recorded solar generation covering up to 72% of demand during the summer, and Texas set new records for solar generation and battery contributions during evening peaks. Notably, in China and India — the world's largest coal energy systems — fossil generation decreased simultaneously for the first time in 2025: clean energy is growing faster than demand. Additional pressure on oil demand is created by electric transport: the Chinese electric vehicle fleet alone replaced about 34 million tonnes of oil in the first half of 2026.
Coal: Correction After Geopolitical Rally
The coal market is moving in line with Middle Eastern geopolitics. Newcastle thermal coal, which soared to multi-year highs in the second quarter amid the conflict between the US and Iran and Indonesia's export restrictions, has corrected to $127–130 per ton — still about 16% above last year's level, but significantly below May's peaks. Coking coal, which reached around $240 per ton, has also decreased as de-escalation occurs. Demand in Asia remains a structural support for the market: the electricity needs of India, China, and ASEAN countries sustain stable imports, while underinvestment in new export capacities limits supply elasticity.
Key Milestones for Investors on August 6
The agenda for the upcoming trading sessions is centered around several factors:
- Official announcement of the agreement on the Hormuz Strait — the main trigger for oil, gas, and freight rates; confirmation of the deal will increase pressure on Brent, while a failure will return prices to $90.
- Recovery rates of Qatari LNG exports — a determining factor for European gas prices and the speed of filling UGS before winter.
- US oil and petroleum product inventory data — an indicator of supply and demand balance during the peak driving season.
- Dynamics of fuel prices on exchanges in Russia following the extension of export bans.
- September oil production increase by OPEC+ and the capability of Gulf countries to effectively meet their quotas with the strait reopened.
For energy market participants, the upcoming weeks will be a test of how sustainable the diplomatic de-escalation in the Middle East is. The combination of increasing OPEC+ supply, potential returns of Gulf barrels, and record expansion of renewables create a bearish backdrop for oil prices in the second half of 2026 — however, the fragility of the ceasefire and the vulnerability of logistics from the Red Sea to Suez leave the market with ample room for new price shocks.
