Brent strengthens as US and Iran exchange strikes for the first time in weeks

Prices strengthened as the US and Iran traded strikes for the first time in weeks after American forces attacked two rocket launchers on Larak Island in the Strait of Hormuz. Iran said it had struck US military bases in Joran in response, targeting the US-operated King Hussein and Al-Azraq Airbases. Meanwhile, the US Treasury is likely to unveil weekly new secondary sanctions aimed at increasing economic pressure on Iran, with an initial focus on banks, starting with Banque Misr’s (Eqyptian Bank) UAE branches. Asian refiners are increasing purchases of Argentina’s Medanito crude as the Iran war disrupts Middle Eastern supply, with its WTI-like quality, $1–2/bbl discount and avoidance of major chokepoints supporting diversification. Japan’s oil diversification away from the Middle East is driving growing demand for US, Latin American and African crude, creating new shipping routes and opportunities for Nippon Yusen. Brazil’s upcoming planting season is expected to intensify an already tight diesel market, as rising agricultural demand adds pressure to limited middle-distillate supplies. Finally, the Nov/Dec’26 and Nov/May’27 Brent futures spreads are at $2.40/bbl and $10.50/bbl respectively.

380 complex opened a bit higher this morning due to higher crude with Sep/Oct at $31.50/mt. As the morning progressed spreads and cracks sold off with Sep/Oct selling down to $28.75/mt by close of window, Sep crack was offered down from -$2.60/bbl to -$2.90/bbl and 380 e/w was shed around a dollar to $53.25/mt. Barges were relatively quiet like Euro 0.5, Sep Barge Crack traded around -11.35/bbl.

Sing 0.5 opened higher this morning on higher crude, this strength continued as there was real buying on both spreads and cracks, Sep/Oct was bid up from $42.00/mt to $45.75/mt while Oct/Nov gained a dollar to $29.00/mt. Sep crack was choppy this morning, it initially traded up from $22.35/bbl to $22.80/bbl by window end but then sold back down to $22.40/bbl post window. Due to bank holiday, there was little traded on Euro 0.5, Sep crack traded between $7.00/bbl and $7.20/bbl.

This morning in distillates, Sing gasoil spreads were well offered from Sep through Dec on higher IPE, with Sep/Oct trading from $5.65 down to $5.4/bbl. Front EW was well offered, hit down from -$95.5 to -$100/mt into end window. Kero spreads saw sell side interest, pushing Sep regrade down to -$4.85/bbl. Prompt ICE gasoil spreads opened higher before weakening, with Sep/Dec trading from $171 down to $169/mt, while Oct cracks weakened to $68.5/bbl.

This morning in Gasoline, MOC better bid then flipping to better offered at the end of the window, with -3c getting sold. Sep/Oct 92 finds some selling at $6/bbl beginning of day but we see $6.45/bbl getting lifted during the window – which then turns better offered post window with selling interest at $6.3/bbl. Trade buyer of Sep EBOB flat price this morning seeing EW gaping lower on thin liquidity, seeing -$26/bbl and -$26.6/bbl getting sold. Banks sellside of 92 cracks at $24.2/bbl this morning.

This morning in naphtha was quiet given the Europe bank holiday, with MOC better bid as shavers lifted fp to sell flats into MOC, while NWE stayed illiquid. MOPJ was stronger on cracks, with Sep opening around $4.60/bbl, bid up to $4.75/bbl before easing to $4.55/bbl, while Q4 traded at $2.25/bbl. Spreads were firm but illiquid further down the curve, with Sep/Oct around $30/mt and Oct/Nov at $30.50/mt. E/W was quiet, with Sep trading smalls around $58/mt and little else changing hands. NWE naphtha was illiquid, though Sep cracks were offered around -$1.80/bbl in the window with bids closer to -$2.20/bbl.

This morning in NGLs, Chinese were early flat price buyers out of Nov and Apr at $723/mt and $609/mt respectively. The Saudi CP settle was released with C3CP at $625/mt, and C4CP at $660/mt, and off the back of this Oct FEI/CP was lifted at $148/mt, up from last week’s closing level of $129.5/mt. Following the crude move over the weekend, LST/FEI opened lower in both Sep and Oct, trading at -$400/mt and -$362/mt, down from -$382.5/mt and -$347.5/mt respectively at Friday’s close. FEI spreads were also trading higher, with Sep/Oct trading up to $38/mt, and Dec/Jan trading at $18/mt, compared to its opening level of $15.5/mt. There was also some Dec/Dec selling at $128/mt. End window on screen, Sep FEI flat price was lifted at $800/mt.

Kevin Warsh delivered a hawkish debut at Jackson Hole - stopping short of an explicit hike call but making clear that policy does not look restrictive, that inflation progress over two years has been modest, and that if the Fed cannot be confident inflation is moving toward 2% "clearly and at sufficient speed - we have work to do." Markets repriced immediately: the front end shifted from one hike priced in 2026 to 1.5, a 57% chance of a hike at the September 16th meeting, the 2-year yield rose 8bps, the dollar gained, and the curve flattened 7bp (however 2s and 10s yields are now back at cycle highs) - all consistent with a Fed that remains credible in its inflation fight. Warsh was careful to frame the speech as neither forward guidance nor a formal reaction function, noting a "good majority" at the July meeting favoured waiting. Worth remembering: Warsh has spoken hawkishly before - and then failed to act at his first meeting as Fed Chair. Talk is good. Action is better… my concerns are he’s a Trump appointment, he’s talked hawkish before and it’s too close to mid terms to hike.

Spot gold falls 3.2%, below $4,500/oz as Fed Chair Warsh says price stability is now the Fed's "predominant focus."

Bitcoin falls -$3,000 in 60 minutes as $200 million worth of levered longs are liquidated.

Chinese yuan hits its highest level against the U.S. dollar since January 2023. The yuan has now strengthened more than 9% against the dollar in the last 4 months.

Reality. bond yields are rising in all developed economies. (Bloomberg) Germany 10Y bond yield just hit 3.275%, its highest level since the 2011 Euro Crisis.

Biggest two-day jump in soft commodities. WisdomTree Agriculture is going almost vertical…. Inflation!

Wheat is making new multi-year highs while speculators are currently net-short. Wheat prices have risen +19% so far this month, and are up +50% since the start of 2026. (Ole_S_Hansen)

After their great earnings (GOAT apparently!) Nvidia stock fell 4.6% on Friday. Hhhhmmmm.

And for those of you not in the markets in 2008, here is a similarity!...... Goldman is now packaging synthetic total-return swaps on hyperscaler credit because CDS on "cash-rich" Big Tech is widening — Meta 75–92bps, NVIDIA 54–82bps, with NVIDIA CDS at points trading above its own cash bonds. (zerohedge)