Hedge funds and algorithmic traders are repositioning for further gains in crude oil as renewed attacks on energy infrastructure and shipping routes across the Middle East intensify concerns over a potential supply shock, according to a report by Bloomberg.
West Texas Intermediate futures finished slightly higher at about $83 a barrel on Monday after moving through a roughly $5 range during the session. Brent crude briefly climbed above $90 before retreating, with both benchmarks remaining close to their highest levels in weeks.
The latest rally comes as the market continues to react to conflicting signals over the direction of the US-Iran conflict. While diplomatic efforts have raised hopes of a temporary pause in hostilities, attacks on tankers and energy facilities have increased the risk premium embedded in oil prices.
Yemen’s Iran-backed Houthi movement said it would prohibit maritime traffic from Saudi Arabia, raising fresh concerns about the Red Sea shipping corridor and the kingdom’s ability to move crude through pipelines linking its eastern oilfields with export terminals on the Red Sea.
The market has also been closely watching reports that mediators have proposed a 10-day halt to US and Iranian strikes as part of efforts to revive an interim peace arrangement. Tehran has confirmed that intermediaries have been discussing proposals to reduce hostilities, although US President Donald Trump has threatened further consequences following the deaths of three American soldiers.
For hedge funds, the latest move in crude marks a sharp reversal in positioning. Money managers added net-long positions in ICE Brent at the fastest pace since 2016 last week after renewed US strikes on Iran. That shift followed a period in which positioning had approached historically bearish levels, meaning the subsequent rally has been magnified by short covering.
Commodity trading advisors could provide an additional source of buying pressure if prices continue to rise, according to analysts.
The renewed attacks have also placed the Strait of Hormuz — through which roughly a fifth of global oil supplies typically pass — at the centre of the market’s concerns. Shipping activity through the waterway has slowed sharply, while two vessels operated by a major Greek tanker company were reportedly hit overnight.
The potential for a supply squeeze is being amplified by already-tight inventories. Global oil stocks outside China are at record lows, according to JPMorgan Chase, leaving relatively little buffer against a prolonged disruption.
Refined products have also rallied, with US gasoline again moving above $4 a gallon and diesel exceeding $5. Heating oil futures rose as much as 3.4% on Monday as disruptions through Hormuz compounded the impact of Russia’s ban on diesel exports for July.
Supply risks are not confined to the Middle East. Operations at the Caspian Pipeline Consortium’s export terminal on Russia’s Black Sea coast were suspended following drone attacks, after a similar disruption over the weekend.
