Oil Market: Geopolitical De-escalation Drives Prices Down
Global oil prices are experiencing the sharpest reassessment since the beginning of the year. Brent is trading around $79–80 per barrel, while American WTI is around $75–76. Just at the end of July, the international benchmark was above $90 due to attacks on tankers in the Persian Gulf. However, Washington's decision to postpone military operations against Iran and initiate direct negotiations has shifted the market downward. The weekly drop in prices approached 10% as traders rapidly pulled out the "war premium" that had formed since spring.
Volatility remains extreme: on Wednesday, oil briefly increased in price following reports of a Houthi attack on a Saudi vessel in the Red Sea, reminding the market that risks to maritime logistics are not limited to just the Strait of Hormuz. Nevertheless, the prevailing trend is a bet on de-escalation. Analysts caution that if negotiations fall through, a return to prices of $90 and above could happen within hours.
Strait of Hormuz: Parameters of the Historic Agreement
A key event for the global oil and gas market is the interim agreement between the U.S., Iran, and Oman regarding the opening of the Strait of Hormuz, through which around 20 million barrels of oil and oil products were transported 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 those exiting will take a southern route through Omani waters.
- No transit fees: tariffs and fees for passage will not be charged.
- Demining of the main shipping lane within 30 days, after which a transition to permanent bilateral movement is possible.
For Bahrain, Iraq, Kuwait, and Qatar, which have no alternative export routes, the opening of the Strait signifies the restoration of critically important oil and LNG flows. At the same time, Washington underscores that if the agreements falter, a power scenario will be back on the negotiation table.
OPEC+: Alliance Completes Return of Voluntary Cuts
In a virtual meeting on August 2, the "seven" of OPEC+ — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman — agreed to increase oil production in September by 188,000 barrels per day. This move marks the end of the return of 1.65 million b/d to the market, which had been curtailed under the second phase of voluntary restrictions since April 2023. Until the end of 2026, approved quotas will apply to participants without additional cuts; the next monitoring meeting is scheduled for September 6.
The paradox of the current moment is that the Persian Gulf countries were physically unable to choose their quotas due to the blockade of the Strait of Hormuz. The opening of this key artery could quickly return significant volumes to the market, which will increase pressure on prices in the second half of the year — a factor that investors should consider in 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 Strait of Hormuz has removed about a fifth of the global LNG supply, primarily from Qatar, exacerbating competition between European and Asian buyers. The consequences are palpable:
- TTF hub prices remain in the range of €56–59 per MWh — approximately 30% higher than levels at the end of June;
- EU's underground gas storage facilities (UGS) are only 55–56% full — the lowest for this time of year in almost 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 Strait of Hormuz at the end of July since early July. If the agreement on the strait is implemented, the restoration of Qatari shipments could significantly cool gas prices and accelerate filling European storage. Otherwise, the market may begin to preemptively price in a winter shortage.
Refining: Global Shortage of Capacity and Fuels
The global refining sector is operating under multiple shocks. Damage to refineries in the Middle East, strikes against refining infrastructure amid the Russian-Ukrainian conflict, China's export restrictions on oil products, and Russia's ban on diesel exports are collectively constraining the global supply of motor fuels. Crack spreads remain elevated, supporting margins for surviving plants, while European refiners diversify their feedstock sources, notably increasing oil supplies from Guyana to bypass traditional Middle Eastern routes.
Russian Fuel Market: Export Restrictions Until 2027
The Russian government has extended a full ban on the export of motor gasoline until January 31, 2027 — an unprecedentedly long horizon for restrictions, reflecting the depth of imbalance in the domestic market. An embargo on diesel exports is in effect until at least the end of August. The reasons for this tightening are:
- Increased drone attacks on Russian refineries since March, reducing motor fuel output;
- High seasonal demand during holidays and harvest season;
- The need to curb rising exchange and retail prices at gas stations.
The effect is already evident in the diesel segment: exchange sales of summer diesel fuel on the SPbMTSB doubled in a week, and the market is discussing the risk of overstocking that could force plants to reduce production — with a side effect of reducing gasoline output. Regulators will have to balance between saturating the domestic market and maintaining the refining economy.
Electricity and Renewables: Renewables Cement Leadership
The global energy transition continues to set records. By the end of 2025, renewable energy sources have for the first time in a century surpassed coal in the global electricity balance — 33.8% compared to 33.0% of generation. In 2026, the trend is accelerating: in the U.S. in the first quarter, solar plants and storage systems accounted for 91% of all new capacities, and the renewables sector could attract up to $120 billion in investments per year. The California power system recorded summer solar generation covering up to 72% of demand, while Texas set new records for solar output and the contribution of batteries during evening peaks. Significantly, in China and India — the world's largest coal-fired energy systems — fossil generation synchronized decreased for the first time in 2025: clean energy is growing faster than demand. Additionally, electric transportation adds pressure on oil demand: the Chinese electric vehicle fleet alone displaced about 34 million tons of oil in the first half of 2026.
Coal: Correction After Geopolitical Rally
The coal market is influenced by Middle Eastern geopolitics. Newcastle thermal coal, which soared to multi-year highs in the second quarter amid the U.S.-Iran conflict and export restrictions from Indonesia, has corrected to $127–130 per ton — still about 16% higher than last year's level but significantly lower than the peaks of May. Coking coal, which reached around $240 per ton, has also decreased as de-escalation occurred. Demand in Asia remains a structural support for the market: the needs of the electricity sectors in India, China, and ASEAN countries maintain steady imports, while underinvestment in new export capacities limits supply elasticity.
Key Indicators for Investors as of August 6
The agenda for the upcoming trading sessions focuses on several factors:
- Official announcement of the agreement regarding the Strait of Hormuz — a key trigger for oil, gas, and freight rates; confirmation of the deal will increase pressure on Brent, while a disruption will push prices back to $90.
- Rate of recovery for Qatari LNG exports — a determining factor for European gas prices and the speed of filling UGS before winter.
- Data on oil and petroleum product inventories in the U.S. — an indicator of supply and demand balance during the peak automotive season.
- Dynamics of fuel exchange prices in Russia following the extension of export bans.
- September's production increase from OPEC+ and the capacity of Gulf countries to effectively allocate quotas with the strait open.
For participants in the energy market, the coming weeks will test the sustainability of the diplomatic de-escalation in the Middle East. The combination of increasing OPEC+ supply, potential return of Gulf barrels, and record expansion of renewables creates a bearish backdrop for oil prices in the second half of 2026 — yet the fragility of the ceasefire and vulnerability of logistics from the Red Sea to Suez leave the market with ample room for new price shocks.
