Dollar Surge Triggers Long Liquidation in Oil Futures Amid Escalating Geopolitical Risks

A stronger dollar triggered profit-taking and long liquidation in crude oil futures, with August WTI crude (CLQ26) falling -0.65 (-0.82%) and August RBOB gasoline (RBQ26) declining -0.0162 (-0.49%). Despite the sell-off, crude prices found support amid escalating US-Iran tensions, which have disrupted oil flows through the Middle East. The International Maritime Organization (IMO) warned that crossing the Strait of Hormuz has become too dangerous, with visible transit dropping sharply. Bloomberg data shows the seven-day moving average of oil flows through the strait plummeted to 5.5 million bpd from 9.4 million bpd before the US-Iran ceasefire collapse. Supply constraints are further exacerbated by Ukraine's intensified drone attacks on Russian oil infrastructure, reducing production to 8.928 million bpd in June—the lowest in 2.5 years. Russian crude-processing rates averaged 3.91 million bpd in early July, the weakest in 21 years, as attacks hit 24 of Russia's 34 largest refineries. With 90% of Russian regions imposing fuel rationing, the country's diesel exports—second globally after the US—face severe disruptions.

■August WTI crude prices dropped -0.82% amid dollar strength and profit-taking

■Ukrainian drone strikes crippled 24 of Russia's 34 largest refineries

■Strait of Hormuz oil flows fell 42% from pre-ceasefire levels

■Crack spread surged to record highs, boosting refiner demand

Kemal Tekin: Energy markets are directly reflecting geopolitical risks. While dollar strength prompts short-term liquidation, supply tightness from the Middle East and Russia could drive prices up by 10% in late 2026. Investors must hedge against these volatility spikes. The Strait of Hormuz disruption alone poses a systemic risk to global energy trade flows.