The real oil shock from the Iran war might be just beginning

July 22, 2026 — 9:57am

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A new front has opened in the war in the Middle East, global oil and refined product inventories are tumbling and oil and gasoline prices are spiking again. So much for all that winning.

After the 60-day ceasefire agreement was signed by the US and Iran last month and the Strait of Hormuz reopened, shipments of crude oil from the Gulf recommenced and oil and gasoline prices fell sharply, with Brent crude trading (briefly) below $US70 a barrel.

The oil market, which had been helped by the release of about 300 million barrels from strategic reserves and China’s halving of its imports, appeared to be recovering rapidly. Global oil inventories rose by 21 million barrels in June, the first increase since the outbreak of the war in February.

The breaking down of the ceasefire late last month initially had only a modest impact on oil prices, which edged up towards, and then above, $US80 a barrel as the hostilities resumed and intensified.

On Monday, however, with the Strait of Hormuz effectively closed again, the Iran-aligned Houthis sent an email to most of the world’s major shipping companies, threatening to attack ships attempting to export oil from Red Sea ports via the Bab al-Mandeb strait.

The oil shock definitely isn’t over and, indeed, with no obvious way for the US to gracefully retreat from the conflict it chose to start, the real shock might just be getting underway.

The Saudis have been using their pipelines and their port at Yanbu to ship about 4 million barrels a day – compared with only about a million barrels a day before the war broke out – via the Red Sea, with about 2.5 million barrels a day heading south, via the strait, to Asian buyers and the rest travelling the far longer route via the Suez Canal (which can’t handle the larger tankers) at the northern end of the sea.

The oil price........

© WA Today