Brent Jumps 5% to $88.00 as U.S. and Saudi Strike Iran-Backed Groups in Iraq; Iran Rejects Oman's Hormuz Proposal

Wednesday, July 29, 2026 | 6:30 AM ET

Brent (October) $85.71 | WTI (September) $83.02 Brent +$3.71 (+4.5%), WTI +$3.76 (+4.7%). The U.S. and Saudi Arabia struck Iran-backed groups in Iraq Wednesday over drone attacks on Saudi oil facilities, hours after the U.S. military said it intercepted an Iranian ballistic missile attack on U.S. troops. Tehran has ruled out Oman's regional Hormuz management proposal. API data showed U.S. crude stocks fell about 3.3 million barrels last week; EIA figures are due later today.

Iran rejecting the Oman proposal is the more consequential headline today, even though the strikes will get the attention. That proposal was the only concrete diplomatic mechanism on the table, and its collapse confirms ING's caution from Tuesday: talk of de-escalation was running well ahead of anything happening in actual flows. UBS's Giovanni Staunovo tied today's rally directly to that dynamic, renewed strikes plus Iranian officials reiterating they intend to control Hormuz shipping while flows remain depressed. DBS's Suvro Sarkar frames the likely path forward well: expect Brent to keep whipsawing in an $80 to $100 range as the conflict ebbs and flows, with repeated stop-start negotiation cycles meaning no clean resolution, which could leave a higher price floor near $80 even in a de-escalation scenario.

The Bab el-Mandeb data continues to run counter to the Hormuz story, and that divergence is becoming a defining feature of this market. Only a handful of ships have transited Hormuz this week, but Bab el-Mandeb saw 39 vessels Tuesday and five more Wednesday, the highest weekly pace since July 19, just before the Houthis announced their blockade. ADNOC's tender activity supports the same read: the UAE producer sold at least 12 million barrels at premiums in its seventh tender since June, with Chinese majors paying $3 to $4 over Dubai quotes and Indian Oil paying flat to a $1 premium, bringing ADNOC's total sales since June past 86 million barrels even as it keeps using a shuttle fleet to move crude quietly out of the Gulf. Buyers are paying up for cargoes that can actually move, which is a more reliable signal than either government's public statements.

OPEC+'s likely pause on output increases from October adds a slower-moving but important layer to the supply picture. Sources say the core seven members will likely raise September output by roughly 188,000 bpd at their August 2 meeting, completing the phased unwind of the 2023 cut, then hold steady through year-end while the group works through a capacity audit that will set 2027 baselines. UBS's Staunovo noted the obvious point, that future levels depend heavily on how the Iran conflict evolves, and Iraq's separate push for a higher individual quota adds friction to a negotiation the IEA says is already complicated by the possibility of a significant 2027 surplus if Hormuz flows eventually normalize. Roughly 2 million bpd of group-wide cuts remain in place after September regardless of how that debate resolves.

Russia's diesel export ban likely being extended another month, with an outside chance of lifting in mid-August if domestic supply improves, keeps a lid on any relief in the products market. Diesel and gasoil loadings from Russia have already fallen to roughly 234,000 bpd in early July from 400,000 in June and around 817,000 across 2025, and the ban is forcing regular buyers like Brazil and Turkey to compete with Europe for U.S. cargoes. That's a second source of sustained tightness in refined products layered on top of whatever the crude side does from here.

Top Developments

U.S. and Saudi Strike Iran-Backed Groups in Iraq After Intercepted Missile Attack

The U.S. and Saudi Arabia launched strikes on Iran-backed groups in Iraq Wednesday, blaming them for drone attacks on Saudi oil facilities. The strikes followed the U.S. military's announcement that it had intercepted an Iranian ballistic missile attack targeting U.S. troops in the region. Separately, a senior Iranian official told Reuters Tehran has ruled out Oman's proposal for joint regional management of the Strait of Hormuz, ending the most concrete diplomatic opening raised this week.

Bab el-Mandeb Traffic Hits Highest Level Since Mid-July as ADNOC Sells 12 Million Barrels at Premium

Bab el-Mandeb crossings reached 39 vessels Tuesday and five more Wednesday, the highest weekly pace since July 19. Hormuz traffic remained scant by comparison. ADNOC's latest tender, its seventh since June, sold at least 12 million barrels to Asian buyers at premiums, including Chinese majors paying $3 to $4 over September Dubai quotes and Indian Oil Corp buying Upper Zakum crude at flat to a $1 premium, bringing total sales across the tenders to more than 86 million barrels since June.

OPEC+ Likely to Pause Increases After September, Russia Weighs Extending Diesel Ban

Sources say OPEC+'s core seven members will likely raise September output by about 188,000 bpd at an August 2 meeting, then hold production steady for the rest of the year pending a capacity review that will set 2027 quota baselines. Roughly 2 million bpd of group-wide cuts remain in place after September. Separately, Russia is preparing to extend its diesel export ban by another month, with a possible lift in mid-August if domestic supply improves; Russian diesel and gasoil loadings have fallen to roughly 234,000 bpd in early July from 400,000 in June.