Oil Prices Tumble as Traders Price In a Strait of Hormuz Breakthrough - oilprice.com

KUALA LUMPUR, 10 AUGUST 2026 —

Oil prices have plummeted as traders anticipate a potential breakthrough in the Strait of Hormuz, a critical waterway for global oil and liquefied natural gas flows. As of Friday, September WTI crude oil futures are trading at $78.08, down $8.72, or 10.05%, for the week. The market's sharp decline is a clear indication that traders have priced in the possibility of a diplomatic resolution to the conflict, which could lead to the restoration of crude flows through the Strait of Hormuz.

The early selloff was driven by optimism surrounding talks between Iran, Oman, and the United States, which sparked hopes of a path toward reopening the Strait of Hormuz and releasing more Gulf crude into the global market. However, the market's enthusiasm was short-lived, as it became clear that the shipping problem had not been fully resolved. Iran's demands for influence over ships entering the Gulf and visibility over vessels leaving it may create a temporary arrangement, but it does not restore unrestricted shipping or give refiners confidence that cargoes will move on schedule.

The Strait of Hormuz remains a critical issue, as it handled about one-fifth of global oil and liquefied natural gas flows before the conflict. A limited shipping lane controlled by Iran would be an improvement over a closed route, but it is not a return to pre-war conditions. Gulf crude and condensate exports are still running well below pre-war levels, and the physical evidence traders need to see change before they can keep pressing WTI lower is not yet available. The futures market has already discounted a reopening, but export volumes have not confirmed one.

The latest EIA report provided a bearish domestic supply number, with U.S. commercial crude inventories rising by about 2.5 million barrels in the week ended July 31, against expectations for a draw. Imports increased, refinery runs eased, and stocks at Cushing rose sharply. This build followed the prior week's large draw and gave traders a reason to believe the immediate domestic supply squeeze had eased. However, the report was not completely bearish, as gasoline inventories fell, and distillate stocks posted a larger-than-expected draw.

The Red Sea adds another layer of risk to the market, as Houthi claims of attacks on Saudi tankers near Yanbu and in the Gulf of Aden renewed concerns about the alternate route. Saudi Arabia has not confirmed the strikes, but the claims arrived at the wrong time for sellers. The Red Sea had become the backup outlet for Saudi barrels while Hormuz traffic remained restricted. If that route comes under sustained pressure, the market has fewer options for moving crude out of the region.

From a technical analysis perspective, September WTI crude oil futures are in a position to close lower this week after trading down to a critical long-term retracement zone at $75.40 to $70.70. Additional support is being provided by the 52-week moving average at $69.35. The next upside target is the short-term retracement zone at $81.21 to $84.53, followed by the May and July swing tops at $93.50 and $95.30, respectively. The market appears to be in "sell the rally" and "buy the dip" mode, which is typical of a headline-driven trade.

The direction of the Weekly September Crude Oil futures contract for the week ending August 14 is likely to be determined by trader reaction to $80.31. A sustained move above $80.31 will signal the presence of buyers, not just short-covering, and put the market in a position to extend the gains into the retracement zone at $81.21 to $84.53. On the other hand, a sustained move under $80.31 will indicate the presence of sellers, and the first area of focus will be $75.40 to $70.70. The bears need proof that ships can move through Hormuz repeatedly, safely, and at volumes refiners can depend on, while the bulls need only one delay, new restriction, or attack claim to remind the market that the physical supply system is still operating below capacity.

As the market looks ahead to next week, the key question will be how much of the buying is fresh demand and how much is short-covering. The market appears well-supported, with buyers likely to step in on dips over the next several weeks as long as the 52-week moving average at $69.35 holds as support. The weekly loss is substantial, and the supply risk is not gone, but the market's ability to bounce back from the weekly low suggests that the trade is not yet settled. With the Strait of Hormuz still a critical issue and the Red Sea route under threat, the market will continue to be driven by headlines and technical analysis, making it essential for traders to stay vigilant and adapt to changing market conditions.

Related: Strait of Hormuz