Has Geopolitical Risk Failed to Rescue Brent and WTI in July’s Oil Slump?

Oil prices spiked this July as violence and military escalation rattled the Middle East, but even the year’s wildest headlines haven’t kept Brent and WTI from slumping to multi-month lows.

Investors expecting a lasting rally found geopolitics overshadowed by larger forces: rising supplies, strong inventories, and a summer demand that fizzled rather than soared.

Could stable Gulf production minimize the impact of Middle East unrest?

Analysts note that while the Iran-Israel conflict and U.S. intervention jolted prices, Brent soared past $81, and stability across major Gulf producers quickly tempered those gains. Once a ceasefire cooled headlines, prices descended well below their crisis-driven peaks, showing short-lived volatility rather than sustained panic.

Did you know?
Did you know that even during major conflicts, global oil prices often fall once disruptions prove fleeting and production remains steady?

Will weak global demand continue to overshadow supply shocks this summer?

Despite the drama, oil demand failed to keep up. Peak driving season in the U.S. brought lackluster gasoline consumption, and global economic jitters weighed on daily crude use. This imbalance, highlighted by large gasoline stock builds even in the summer, undermined any geopolitical premium in the price.

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OPEC+ output growth weighs on prices despite regional conflict

Rising OPEC+ production compounded the downward pressure. Even as war risk put traders on alert, growing barrels from major exporters flooded the market, erasing much of the risk premium tied to Middle East unrest. Many experts assert that the long-term impact on price remains muted unless regional conflict closes supply routes or halts output.

Inventory builds and lower demand drive July’s oil market retreat

July's EIA data showed a 3.9 million barrel draw in U.S. crude stocks, but this was offset by surprisingly high gasoline and diesel builds. Weak demand, particularly for gasoline, has been the bigger story, dragging prices lower in spite of headline-driving crises. The market prioritized fundamentals over flashpoints, settling both Brent and WTI near or below the year's averages.

Unless a conflict tangibly disrupts physical supply, oil's traditional sensitivity to geopolitical shocks appears blunted. As analyst Carole Nakhle observed, “The lack of supply disruptions played a role, but more importantly, it reflects the underlying market fundamentals.”

Heading into late July, traders are watching for further OPEC+ moves, continued economic softness, and any new flashpoints that could break the current cycle of short spikes followed by rapid reversals. For now, geopolitics adds volatility, but fundamentals remain firmly in control.