Geopolitical Risks and Fed Dynamics Collide in Oil Markets

Global energy markets saw risk appetite improve, pushing Brent crude to $79.91, driven by escalating tensions in the Middle East and a softening of the US Federal Reserve's (Fed) hawkish stance. After testing the $80.95 level yesterday, barrel prices consolidated today, bolstered by supply concerns while supportive data on the demand side reinforced the upward trajectory.

Red Sea Flare-Ups: Supply Security Under Siege

Geopolitical risks in the Middle East remain the primary determinant of the premium in crude oil prices. The flow of news from the region triggers concerns about supply disruptions, while the financial crisis on the Iranian side deepens risk perception.

■Yemen's Iran-backed Houthi rebels announced they targeted a Saudi-owned oil tanker named "Daisy" with a ballistic missile in the Gulf of Aden.

■Houthi spokesman Yahya Saree stated that this attack was carried out under the strategy of "blockade with blockade," declaring that Saudi-owned ships will not be allowed to pass through the north or south of the Red Sea until the blockade on Yemen is lifted.

■In Iran, the state-owned Industry and Mine Bank froze the bank accounts of the National Iranian Oil Company (NIOC) due to debts, signaling a deepening financial squeeze in the country's oil sector.

Fed Shadow Fades: Demand Outlook Brightens

Shifts in expectations regarding monetary policy are creating upward pressure on oil prices by supporting the demand outlook. Weak data released in the US strengthens the possibility that the Fed's aggressive rate hike cycle may end soon.

■Private sector employment in the US rose by 44,000 in July, falling below market expectations.

■In market pricing, the probability of the Fed raising the policy rate by 25 basis points next month retreated to 55%, while the probability of a rate hike at the October meeting fell to 80%.

■The decreasing likelihood of a rate hike is expected to support economic activity and, consequently, oil demand.

Hormuz Hope and Inventory Headwinds

Further price increases are capped by positive news flow regarding the reopening of the Strait of Hormuz and inventory data from the US. Signals of easing on the supply side and inventory increases indicating weak demand are restraining the upward movement.

■Iranian and Omani negotiators finalized the draft agreement for the reopening of the Strait of Hormuz, and the draft was submitted for approval to Iranian leader Mujtaba Hamanei.

■Commercial crude oil stocks in the US unexpectedly increased by 2.5 million barrels to 407 million barrels.

■Daily crude oil production rose by 8,000 barrels to 13 million 804 thousand barrels.

■Technically, $81.65 is watched as resistance and $78.68 as support for Brent crude.

Markets are coding this data mix as a "supply-demand battle" in algorithmic trading processes. Houthi attacks and the banking crisis in Iran create sudden price spikes on the supply side; however, the weakness in ADP data signals the Fed is approaching its terminal rate. While the forward shift in rate cut expectations in swap markets supports risk assets in the medium term, the primary driver of today's rise is the geopolitical risk premium. HFT bots may trigger profit taking as we approach the technical resistance at $81.65, especially since the increase in inventories undermines the demand-side narrative.