Iran Rejects Oman Hormuz Plan and Strikes US Forces, Brent Crude Surges to $89.83 Per Barrel

ICE Brent crude futures surged to $89.83 per barrel on Wednesday, up 6.8% from Tuesday's ICE settlement of $84.09, after Iran launched a ballistic missile attack on US forces and formally rejected Oman's proposal to reopen the Strait of Hormuz. WTI crude futures rose to $84.55 per barrel on CME, a gain of 6.67%. The twin moves reversed what Saxo Bank described as Brent's worst three-day decline since April 2020.

Diplomatic optimism had driven the prior sell-off after a meeting between President Trump and Israeli Prime Minister Netanyahu in Washington, where Trump stated there was "a good chance" for progress on Iran negotiations. Senior trader commentary cited by Rigzone noted the decline was "driven far more by positioning and sentiment than by a meaningful improvement in physical crude flows." Iran's rejection of the Oman Hormuz framework and its ballistic missile strike on US forces ended that optimism before Asian markets closed.

Iran Closes the Diplomatic Window

When Oman advanced the Hormuz security proposal, WTI settled at $79.28 per barrel and Goldman Sachs maintained a $76 per barrel floor as its bearish scenario. WTI now trades at $84.55, placing it $8.55 above that floor and invalidating the diplomatic preconditions Goldman's bearish case required. Iran's formal rejection also removes any near-term prospect for restoring Hormuz traffic to pre-war volumes.

Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said Trump's warning of "very strong military action" if talks fail is "maintaining a geopolitical risk premium across crude oil, tanker insurance, and refined-product markets." Carole Nakhle, CEO of Crystol Energy, had noted earlier in the week that the initial run-up was "driven more by concerns over potential escalation than by any fundamental change in market balances." Iran's ballistic missile strike Wednesday morning confirmed those escalation concerns as real rather than speculative.

Hormuz Flows at 50%, Pipeline Alternatives Near Capacity

Shipments through the Strait of Hormuz are currently running at 50% of pre-war levels, according to J.P. Morgan data cited by Rigzone. Seven million barrels per day have been rerouted through overland alternatives. Saudi Arabia's East-West Pipeline routes crude to the Red Sea port of Yanbu, bypassing Hormuz, while the UAE's Abu Dhabi Crude Oil Pipeline terminates at Fujairah on the Gulf of Oman coast. Both pipelines were designed for exactly this scenario, though J.P. Morgan analysts note that rerouted flows at 7.0 million barrels per day are testing the limits of the available overland capacity. J.P. Morgan described the diverted flows as "increasingly vulnerable."

Shipping costs have risen as Red Sea tanker traffic hit multi-month lows due to Houthi activity. Saudi Arabia has begun considering higher Asian crude pricing to account for longer delivery routes. Multiple supertankers are reportedly routing via Egypt to collect Saudi crude amid uncertainty about Red Sea transit options.

API Inventory Draw and EIA Report

The American Petroleum Institute reported a 3.3 million barrel draw in US commercial crude inventories for the week ending July 24, adding supply-side support to Wednesday's price rally. The EIA's Weekly Petroleum Status Report is scheduled for release today, July 29. A confirmed draw of similar magnitude in the EIA data would represent one of the larger weekly drawdowns of 2026 and reinforce the current price momentum.

Even as Brent approaches $90 per barrel, Wood Mackenzie finds the industry reluctant to accelerate investment. The firm projects the global upstream sector will accumulate $495 billion in cash in 2026, assuming Brent pricing near $90 per barrel. The 49 largest oil companies account for $272 billion of that total, equivalent to 70% of their combined annual capital budgets. Tom Ellacott, Senior Vice President at Wood Mackenzie, stated: "Most players have adopted a wait and see approach, preferring to accumulate cash rather than return it to shareholders or increase investment." Global upstream development spending faces a second consecutive year of modest decline while global oil output is expected to drop at least 3% in 2026, per Wood Mackenzie.

On the demand side, the US Consumer Confidence Index fell to 90.8 on Tuesday. A reading below 100 reflects consumers pulling back on discretionary spending, which includes fuel purchases. This headwind has not offset the geopolitical bid in Wednesday morning trading, but it tempers the demand outlook that would otherwise sustain higher prices.