Hedge funds sharply increased their bullish exposure to Brent crude during the week to 14 July, marking the largest weekly build-up in long positions in nearly a decade as escalating conflict between the US and Iran reignited concerns over global oil supplies, according to a report by Bloomberg.

Data from ICE Futures Europe shows that money managers added almost 76,000 long-only Brent futures and options positions over the reporting period, lifting total long holdings to more than 357,000 contracts. The surge represents the strongest weekly increase since late 2016 and follows a period in which speculative positioning had fallen to its lowest level in seven months.

The shift in sentiment reflects a rapid reassessment of geopolitical risk. Earlier expectations that oil markets could face oversupply gave way to renewed concerns after the US intensified military action against Iran. Tehran subsequently launched retaliatory attacks targeting Gulf states and commercial shipping, disrupting traffic through the Strait of Hormuz, one of the world's most important energy transit routes.

The renewed disruption has helped push crude prices to their highest levels in around a month, reversing part of the steep losses recorded during the second quarter, when oil prices fell by roughly 30%.

The tightening supply outlook has also extended beyond crude into refined products. Diesel and gasoline markets have strengthened as supply constraints intensified, boosting refining margins globally.

Hedge funds responded by increasing bullish exposure to US diesel futures, with long-only positions in NYMEX heating oil rising to their highest level since the early stages of the Iran conflict in March. Net-long diesel positions also recorded their largest weekly increase since February, before hostilities escalated.

Fuel markets have faced additional pressure from reduced Russian exports. Continued Ukrainian attacks on Russian refining infrastructure have disrupted production, while Moscow's decision to halt diesel exports has further tightened global supplies, reinforcing the bullish outlook among commodity-focused hedge funds.