Key Points
- President Trump says the US is backing away from a renewed military offensive and will rely on the blockade of Iran.
- Iran says the Strait of Hormuz will remain closed.
- Brent Crude rose to $87.70 per barrel.
- US Strategic Petroleum Reserves fell below 300 million barrels for the first time in more than forty years.
US President Donald Trump has signaled he’s prepared to let economic pressure take its toll on Iran rather than launching further military strikes, as Tehran insists the Strait of Hormuz will only reopen if Washington agrees to several conditions.
Trump, who last week projected confidence in an imminent deal between Washington and Tehran, told Axios on Sunday that he is prepared to wait for economic distress to mount in Iran, backing away from a renewed military offensive.
“We are low-keying it,” Trump said, “We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money.”
Brent Crude is sneaking up again, with October futures above $87 per barrel. A recovery above $90 would signal another test of $100 per barrel.
NEW DELHI, Aug 11 (Reuters) – Shipping traffic through the Strait of Hormuz fell to six on Monday, compared with a 10-day average of about 11 vessels, shipping data showed, amid fading hopes of a peace deal between the US and Iran.
Four commodity vessels, including two empty oil product tankers, entered the waterway, according to Kpler data as of 0420 GMT on Tuesday. Two vessels — a small tanker laden with liquefied petroleum gas and another carrying residual fuels — exited the Strait, the data showed.
In pre-war days, about 130 to 140 ships typically transited the strait.
It is unclear how long the Trump administration will manage to keep a lid on crude oil prices.
Kieran Tompkins, senior climate and commodities economist at Capital Economics, said the relatively “low” level of oil prices reflects that investors have continued to factor in two opposing scenarios — a quick and imminent resumption in energy flows, and a prolonged Hormuz closure….
“If the strait remains closed and oil inventories in OECD countries continue to be depleted quickly, the oil market could reach a tipping point around the start of Q4. This would be consistent with much higher prices, possibly in the region of $120-140 per barrel based on historical form.”
….China “singlehandedly balanced the market in May with its cut-back in [oil] imports,” Amrita Sen, founder and director of research at consultancy Energy Aspects, told CNBC’s “Morning Call” on Friday. However, with Chinese crude imports recovering in July and set to rise further in August, Sen warned that “crude can’t stay down forever.” (CNBC)
Strategic petroleum reserves in the US are falling, with the SPR below 300 million barrels for the first time in more than forty years.
Crude oil stockpiles in the U.S. Strategic Petroleum Reserve have fallen below 300 million barrels, the lowest level in more than four decades, as global inventories stay under pressure due to the Iran war.
The SPR fell by 6.1 million barrels to 298.7 million barrels last week, according to data released by the Department of Energy on Monday. The reserve, created in 1975, is at its lowest level since January 1983.
President Donald Trump ordered the release of 172 million barrels in March after Iran choked off oil exports through the Strait of Hormuz, triggering the largest disruption of crude oil supplies in history.
The drawdown in the SPR, whose authorized storage capacity is 714 million barrels, has raised questions about whether U.S. government stockpiles are on the verge of depletion. The minimum amount of oil needed to safely operate the SPR is about 70 million barrels, an Energy Department spokesperson told CNBC in July.
There is enough oil left in the SPR to do another release if needed, said David Goldwyn, who served as a State Department special envoy for international energy affairs under President Barack Obama.
“I’m not worried about the stability of the reserve or our ability to do another drawdown, if we needed to,” Goldwyn told CNBC.
The SPR may have capacity for one more draw, but no more.
The SPR’s operational capability is at risk due to aging infrastructure, according to a May report from the Government Accountability Office. More than a quarter of its inventory was “not available for drawdown due to a combination of construction outages and cavern outages” as of December 2025, GAO investigators found. (CNBC)
Conclusion
President Trump is backing away from forcing through a peace deal before the November midterms. Iran will likely endeavor to make the interim as uncomfortable as possible for the US, closing the Strait and attacking US allies and bases in the Middle East. We expect Iran to go after the UAE’s Fujairah pipeline, which bypasses the Strait of Hormuz. An attack that closes the pipeline would remove another 5 to 6 million barrels per day of crude oil from global supply.
US Strategic Petroleum Reserves will likely last until November, but low levels are bound to raise prices as refiners attempt to lock in supplies ahead of production runs.
Acknowledgments
- CNBC: Trump signals shift to economic pressure as Iran hardens stance over Strait of Hormuz
- Reuters: Gulf shipping traffic via Strait of Hormuz falls to six vessels
- CNBC: Hormuz Deadlock
- CNBC: Oil in US Strategic Petroleum Reserve falls below 300 million barrels, lowest since 1983
- HFI Research: The Importance Of Fujairah And Why It Is An Inevitable Escalation Point For The Global Oil Market
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.