Latest Oil Rally May Have Much Further to Run

Crude oil is holding a firm bid, with the United States Oil Fund (AMEX:USO) trading at 130.66 dollars, up 0.28 percent on the day and sitting well above the midpoint of its 52 week range of 102.42 to 142.33. The latest oil rally has been building for weeks, and it now hinges on a dangerous pair of chokepoints: the Strait of Hormuz and the Bab el Mandeb.

A Chokepoint Squeeze Pushes the Latest Oil Rally Toward 100 Dollar Talk

Benchmark crude prices, tracked here through USO's 130.66 dollar print, have surged as both the Hormuz and Bab el Mandeb corridors face simultaneous disruption. ICE Brent and WTI each added roughly 10 dollars a barrel over the past week alone, a jump traders are attributing to the twin blockade rather than any single event. The Bab el Mandeb bottleneck can technically be routed around through the Suez Canal, though that means longer voyages and steeper freight bills. Hormuz is the bigger worry: transit volumes through the strait have fallen sharply, and that decline is what has traders and refiners bracing for oil to retest 100 dollars a barrel.

An RSI reading of 57.56 on USO suggests the move still has room to run before it looks technically stretched. That momentum lines up with what is happening on the water. Yemen's Houthis have claimed missile strikes on two Saudi flagged tankers, the Encelia and the Layla, opening what amounts to a second front against Saudi crude exports beyond the usual Red Sea shipping lanes. Shipowners are increasingly routing vessels around Africa entirely to dodge the threat, adding time and cost to every barrel that moves.

OPEC Plus Adds Barrels Even as Shipping Risk Climbs

At its August 2 meeting, OPEC+ is expected to raise September output targets by another 188,000 barrels a day, a move that would push the group closer to fully unwinding the 1.65 million barrel a day voluntary cuts it agreed to back in 2023. That the group is adding supply despite an active US Iran standoff and mounting Red Sea security threats says something about how confident producers are that demand can absorb it, or perhaps how eager they are to defend market share while prices are already elevated.

Not every tanker operator is running scared. Two China owned vessels, the Xin Long Yang and the Cosnew Lake, both loaded with Saudi crude, pushed straight through the Bab el Mandeb despite the recent attacks. That kind of confidence suggests Beijing may have its own understanding with the Houthis, a workaround that leaves Chinese cargoes moving while others reroute.

Ripple Effects Across Metals, Gas and Sanctions

The disruption is not confined to crude. Copper touched a one month high of 13,835 dollars a tonne as Chinese inventories thinned and demand stayed firm, with fading hopes for an Iran ceasefire and renewed US tariffs adding further lift to industrial metals. Panama, meanwhile, is weighing a state owned mining company to help restart the shuttered Cobre Panama mine, a project equal to about 1.5 percent of global copper supply, in a plan that could hand former operator First Quantum (TSE:FM) an operating stake.

Natural gas markets are feeling their own version of the squeeze. Spain and Algeria have agreed to expand gas flows, aiming to lift Medgaz pipeline capacity to 12 billion cubic meters a year alongside more LNG deliveries, as Madrid shores up energy security against the backdrop of US trade threats and rising LNG prices. QatarEnergy has extended force majeure on LNG shipments to Asian buyers and will keep leasing out carriers through October, a sign that Hormuz related export disruptions could stretch well past the third quarter of 2026.

Sanctions activity has not slowed either. The EU has reached political agreement on its 21st sanctions package against Russia, extending the oil price cap by 12 months while softening a renewable energy exemption to allow some Russian LNG transshipment to third countries. Washington added fresh sanctions on three Cuban energy entities, including CUPET's petroleum research arm, and TotalEnergies (NYSE:TTE) is preparing to hand its 10 percent stake in the sanctioned Arctic LNG 2 project to a Novatek subsidiary, another step back from a venture squeezed by restrictions despite ongoing shipments to Asia.

How Long Can Refiners Absorb the Squeeze

Layer onto all of this a separate logistics headache: the Rhine is forecast to hit record low water levels in early August, potentially dropping to just 30 centimeters, a level that could halt barge traffic and disrupt fuel and chemical shipments across central Europe. Traders there are already scouting alternative transport options. Elsewhere, Pakistan has moved to daily fuel price adjustments tied to international benchmarks and currency swings, after burning through nearly half a billion dollars in fuel subsidies so far in 2026, a shift that ties its domestic pump prices more directly to whatever happens next with Hormuz and the Red Sea. With USO still trading near the upper half of its yearly range and geopolitical flashpoints multiplying rather than resolving, the question facing refiners and traders alike is simply how much further this squeeze can tighten before something gives.

Live brent crude oil price and chart → Live crude oil price and chart →