Commodity and interest rate markets displayed a pronounced reflationary trading pattern over the past week, characterized by strength in oil and weakness in bonds.
In the crude complex, WTI, Brent, and SC crude all posted gains on both weekly and monthly charts. Notably, SC crude led the charge with a near 9% surge on the monthly timeframe, outpacing its international counterparts. Brent futures extended their winning streak to five consecutive daily sessions, approaching the formidable resistance zone near the $96 mark. The overarching narrative points to a macro environment where tightening supply expectations and geopolitical frictions bolster energy prices, while robust economic data and fiscal concerns weigh on the bond market, together suggesting a scenario of elevated interest rates coexisting with strong commodity prices.
Crude oil markets maintained an upward trajectory throughout the week. Brent settled above the $94 level on Friday, accumulating a weekly gain of approximately 5.9% and printing five straight bullish daily candles. The rebound from July lows remains intact, with prices now testing resistance around $96. WTI finished near the $87 handle, adding about 5.0% on the week. Despite a single bearish daily candle that saw a minor pullback, the overall price structure continued to firm, with the MACD indicator sustaining a bullish configuration. SC crude displayed the most robust performance, climbing roughly 6.4% on the week and 8.9% on the month, decisively reclaiming the psychological 600 yuan level.
On a cross-market basis, Brent and SC outperformed WTI, underscoring the influence of regional supply-demand imbalances and pricing factors. In terms of headlines, the U.S. issued tariff threats against Iran's trading partners and hinted at more stringent financial pressure. This follows the expiration of the previous U.S.-Iran peace agreement this week, with neither side making overtures to restart negotiations. Tehran has vowed a "devastating" response to any new threats. On the supply front, concerns persist regarding continued output cuts by major producers such as Saudi Arabia, Iraq, the UAE, and Kuwait.
Shipping tracking data cited by a prominent international newswire indicated that only seven bulk commodity vessels transited the Strait of Hormuz on Thursday, representing a 50% drop from the prior day. This volatility in transit numbers has prompted the market to reassess the risk of supply disruptions. However, there are indications that alternative supply routes, including pipelines, shuttle tankers, and other sources, are helping to fill the gap. One trader noted that while sanctions have been the primary tool against Iran, the country's exports have already been significantly constrained by maritime blockades, suggesting the marginal supply impact may be limited. The more significant risk lies in the potential for increased shipping accidents or retaliatory actions that could further disrupt the Strait of Hormuz.
Other analysts point out that while the Strait of Hormuz remains a critical risk point, it is no longer the sole focus. Growing supplies from pipelines, U.S. shale, Venezuela, and the UAE are partially offsetting the shortfall created by major producers' cutbacks. Overall, institutional views are divided between those seeing a limited sanctions premium and those warning of persistent geopolitical tail risks, leaving market sentiment bullish but not uniformly so.
The rise in commodity markets this week is not merely a reflection of improved risk appetite but rather an embodiment of the reflation trade. On the oil front, SC crude leads on the monthly chart, and Brent's five-day rally approaches key resistance. Market participants are currently weighing tariff rhetoric, shipping disruptions, and alternative supply dynamics. In the near term, attention should focus on Brent's technical performance around the $96 area and any further guidance on interest rate expectations from the Jackson Hole symposium.
Why did tariff threats against Iran's trading partners not trigger a more significant surge in oil prices? The market has likely already priced in constraints on Iranian exports. Given that Iran's crude shipments have been hindered by maritime blockades, the marginal supply shock is limited. Meanwhile, pipelines, shale output, and other substitute supplies are filling the void, suppressing the risk premium. However, volatility in Hormuz transit remains a tail risk; should retaliatory actions escalate, a repricing cannot be ruled out.
With Brent approaching the $96 resistance after five consecutive gains, what should be monitored next? The key is to observe the battle between bulls and bears around this level. A breakout on strong volume could extend the short-term momentum, whereas a rejection and subsequent profit-taking might lead to a pullback toward the previous consolidation platform. Additionally, watch for the recovery of Hormuz shipping flows, supply policies from major producers, and shifts in the U.S. dollar and overall risk sentiment.