WTI is trading around $85 per barrel at the time of writing, extending its recovery after gaining 2.5% in the previous session, when the September contract closed near $84.50. The main source of support remains the Middle East, where the temporary agreement between the U.S. and Iran expired without a lasting political settlement, talks on restoring normal shipping through the Strait of Hormuz have stalled, and reports of new attacks on vessels have intensified supply concerns.
An additional risk comes from increased Houthi activity around the Red Sea and the Bab el-Mandeb Strait. Against this backdrop, the market is once again pricing in a higher geopolitical risk premium, although WTI remains well below its July highs.
IEA outlook highlights weaker demand and tighter supply
The medium-term outlook remains mixed. In its August report, the IEA significantly downgraded its global demand forecast and now expects demand to decline by around 1.6 million barrels per day in 2026, citing high fuel prices, weak economic activity and persistent logistical disruptions.
At the same time, global observed inventories fell by 69 million barrels in July and are now roughly 410 million barrels below levels seen at the start of the Middle East conflict. The IEA estimates the global market deficit at around 1.8 million barrels per day in the third quarter, leaving the market caught between weak end-demand and constrained physical availability. This combination helps explain why WTI has not reacted to geopolitical risks as aggressively as it might have under stronger demand conditions.
Hormuz risks keep short-term bias tilted higher
In the short term, risks for WTI remain tilted to the upside as long as disruptions around Hormuz persist and uncertainty over U.S.-Iran negotiations remains elevated. A sustained break above $85–86 could open the way toward the $88–90 area, especially if fresh API and EIA data show a draw in inventories following the previous sharp build.
However, the fundamental upside is still capped by weaker demand forecasts and high U.S. supply. In the absence of a new escalation, the $82–83 area remains a likely zone for renewed buying interest, while a sustained move above $90 would require not only a geopolitical premium but also clearer evidence of an actual shortage in the physical crude market.
Despite the break above resistance around $85 per barrel, a sustained upward move, as I warned in the article WTI rises as Hormuz risks offset surge in U.S. crude inventories, still looks unlikely.
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