Oil to hold $70-$100 range as Iran crude exits global pricing

Iranian crude has exited global oil pricing because of the U.S. naval blockade, leaving Brent near $92 a barrel while the market underprices geopolitical risk, Rapidan Energy Group said.

"The crude oil market is underpricing geopolitical risk," Bob McNally, president of Rapidan Energy Group, said. "Prices will remain in the range of $70-$100 per barrel indefinitely."

Brent traded around $92 a barrel Wednesday, up from a wartime low of $71 during a brief ceasefire in late June and early July. West Texas Intermediate held above $85. Ship traffic through the Strait of Hormuz fell 19.5 percent last week to 95 confirmed transits, with only three vessels crossing on Sunday, according to shipping data platform Kpler. About five million barrels per day are getting through the strait, down from 15 million before the war began Feb. 28.

The blockade has removed Iranian supply from pricing considerations at a time when the U.S.-Iran memorandum of understanding has expired and diplomatic talks remain stalled. President Trump said Wednesday there are "no talks or conversations going on, or scheduled" with Iran, while the naval blockade remains "in full force and effect."

65 vessels redirected as Hormuz blockade tightens

The U.S. military blockade, restarted July 14, has redirected 65 vessels attempting to enter or exit Iranian ports, according to U.S. Central Command. The U.S. Navy has been assisting a limited number of oil tankers through the strait, with about five million barrels per day getting through versus 15 million before the war. Trump said Wednesday "a lot of oil" is coming through, though he acknowledged "nuisance value" from Iranian drone attacks.

Saudi Arabia's Aramco resumed offering crude shipments last week using ship-to-ship transfers off Fujairah in the UAE, according to Reuters, citing shipping data and trade sources. The resumption followed weeks of halted sales after attacks on Saudi tankers in the strait. China, meanwhile, has boosted imports of Russian crude, stymieing Indian refiners who had been buying discounted barrels.

The supply reshuffle extends beyond the Gulf. Yemen's Iran-backed Houthi rebels have targeted Saudi oil infrastructure, including a drone attack on an Aramco refinery in Jazan, while threatening to prevent Saudi Arabia from using Red Sea ports. Crossings through the Bab el-Mandeb Strait, which connects the Red Sea to the Gulf of Aden, rose 6.7 percent to 254 transits last week, though dark transits — ships turning off transponders — fell from 40 to 16, Kpler data shows.

Can the $70-$100 range hold?

The range McNally projects carries implications beyond energy markets. Brent at $92, with WTI above $85, feeds directly into inflation expectations at a time when the Federal Reserve is weighing whether to resume rate hikes. FOMC minutes from July showed three regional presidents — Lorie Logan, Beth Hammack and Neel Kashkari — voted against a policy hold in favor of a 25-basis-point increase, citing elevated inflation across goods and services. Equity markets have absorbed the tension, with the Dow Jones selling off as Treasury buybacks compressed long-end yields.

Gold has surged toward $4,500 per troy ounce as a weaker dollar and plunging long-term Treasury yields converge with geopolitical friction. The Treasury's decision to double longer-dated buybacks to $4 billion has compressed long-end yields, further supporting precious metals while the dollar weakens. Analysts at Forex.com warned that with oil rising toward $90, investors are increasingly concerned about the possibility of a more prolonged inflation shock.

If the blockade persists and Iranian supply remains off the market, the $70-$100 range could prove conservative. The last time oil traded in this range with comparable supply risk — the 2019 attacks on Saudi Aramco's Abqaiq facility — Brent spiked 15 percent in a single session before settling back. With the U.S.-Iran memorandum of understanding expired and no talks scheduled, the risk premium embedded in crude prices may be the only thing keeping them from going higher.

This article is for informational purposes only and does not constitute investment advice.