Over thirty times U.S. officials have claimed the standoff with Iran is about to end, and the Strait of Hormuz will reopen, but the weeks keep passing, and the rhetoric only gets worse, keeping oil prices high.
In the latest move, Trump announced a “devastating economic operation” against Iran, which he described as economic war and unprecedented isolation, after Tehran rejected the U.S. proposal. Iran says it is ready to respond, for example, by threatening fines and the seizure of 45 tankers.
One relief is that the U.S.-organized corridor off Oman is reportedly moving around 10 million barrels of oil a day, with more than 660 million barrels passing through since May, thus limiting the impact on the global oil market. Still, if things worsen, with the Houthis trying to close the Bab el-Mandeb Strait or Iran disrupting the route through Oman, oil could rise again and push inflation higher.
It’s worth noting in this sense that supply disruptions and the Strait of Hormuz blockade have cut global crude inventories by around 519 million barrels between February and August 2026, or roughly 3 million barrels a day. If the decline continues, Citi expects OECD inventories could fall to around 70 days of demand by the end of 2027.
As for the forecast that oil stocks would hit critical levels in August, that didn’t account for tankers using shadow routes through the strait. Still, even with oil below $100, higher prices are feeding into the economy through inflation.
We may get a sense of how central banks plan to deal with that in Jackson Hole, Wyoming, where the Fed will hold its annual symposium from August 27, and Kevin Warsh will speak on Friday.
It will also be worth hearing what he says about U.S. debt above $40 trillion and rising Treasury yields, which raise financing costs and make bonds more attractive than stocks, especially growth stocks.
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