Renewed Hormuz Tensions Drive Oil Prices, Treasury Yields Higher, Kpler Says

The collapse of the US-Iran ceasefire has revived energy inflation concerns, lifting oil prices and US Treasury yields, Kpler said in a Thursday note. The US-Iran memorandum of understanding signed on June 17 is no longer valid, US President Donald Trump said on July 8, after renewed US strikes near the Strait of Hormuz, Iranian attacks on Bahrain and Kuwait, and fresh sanctions targeting Iranian crude exports. Despite those developments, oil prices had been easing before the latest escalation. Front-month Brent crude dropped from the mid-$90s in early June to around $71 per barrel by July 6, shedding about $25/bbl in under a month, Kpler said. Traffic through the Strait of Hormuz also recovered. Crude and condensate shipments averaged 5.7 million barrels per day in June, up from 1.8 million b/d during March to May, before climbing to 8.9 million b/d in the first week of July. At the same time, subdued Chinese buying continued to cap prices. Seaborne crude imports stayed below 7 million b/d, far below the long-term average of 10.4 million b/d, Kpler said. Trump's announcement reversed market sentiment. Front-month Brent briefly moved above $80/bbl.