Every major conflict in the Gulf revives the same fear – not simply of higher oil prices, but of whether the region that supplies around one-third of the world's seaborne crude can continue to underpin the global economy.

This time, however, the question runs deeper. If war prolongs and continues to damage production facilities, export terminals or vital shipping lanes, is the age of Middle Eastern oil nearing its end? Is the world prepared to move beyond oil, gas and the Middle East altogether and survive?

The modern economy was built on abundant and affordable fossil fuel. Coal powered the Industrial Revolution, but oil overtook it after the Second World War as Gulf producers rapidly expanded output. Natural gas followed, becoming an essential fuel for power generation, industry and households. Together, oil and gas still account for more than half of global energy consumption despite the rapid growth of renewables.

Is oil really declining?

Although the 21st century is expected to belong to renewable energy, fossil fuels are likely to dominate the global energy mix for decades. Oil and gas will remain indispensable for transport, heavy industry, petrochemicals and heating even as electricity becomes cleaner.

Renewables are booming. But electricity is only a part of the energy demand. Aviation still depends on jet fuel. Shipping still runs largely on oil. Petrochemicals need crude. Heavy machinery and defence depend on petroleum.

Oil's share is shrinking gradually, but its strategic importance remains enormous. The transition is underway, not complete.

Modern globalisation was built on abundant, affordable energy. The Gulf's real advantage has never been just oil – it has been abundant, low-cost oil.

Can the world replace Gulf supplies?

The Gulf countries supply over a fifth of global crude oil production and about 10% of worldwide natural gas production. The region holds roughly 33% of proven global oil reserves and 21% of natural gas reserves.

A major portion of Gulf oil and liquefied natural gas passes through the Strait of Hormuz, making global supply heavily dependent on maritime stability in the region. With war now spreading to the Red Sea, another major sea trade corridor now comes under fresh threat as Yemen-based Houthis targeted Saudi ships on Bab el-Mandeb. Oil and goods leaving the Persian Gulf through Hormuz must travel past the Arabian Peninsula and typically pass through Bab el-Mandeb to reach the Red Sea and the Suez Canal.

When both channels become unsafe, around one-fifth of global oil supplies and one-tenth of natural gas supplies are effectively cut off from the market.

Some potential alternative suppliers are the United States, Canada, Brazil, Guyana, and Norway. Some have already boosted output and exports, but physical constraints remain as they cannot build production, storage and export infrastructure overnight to further scale up supplies.

These producers may benefit in the short term from supply gaps, but they are far from being able to replace the massive supply deficit from the Persian Gulf immediately. Russia and Venezuela could have been better alternatives had sanctions not constrained their production and exports.

Modern globalisation was built on abundant, affordable energy and the Gulf provided that. If prolonged war and persistent sanctions push oil prices to $120-$150 a barrel for months or years, the world will face higher inflation, costlier shipping, and rising prices of food, fertilisers and raw materials, leading to slower trade. For smaller economies like Bangladesh, the impact would be far worse; government subsidies would rise and debt stress would deepen.

Scarce and expensive oil and gas will accelerate the transition to electric vehicles, renewable energy, and emerging alternatives such as hydrogen. But any such transition takes decades.

In the meantime, energy scarcity and high prices could instead reverse the global push for clean energy. Coal is already making a comeback as countries rely on it to generate more electricity. Governments often return to fossil fuels during crises, even while investing in clean energy for the long term. The electricity-hungry AI industry is also prompting the US to invest more in nuclear energy.

What it means for Bangladesh

The world is unlikely to move beyond oil and gas anytime soon, and moving beyond the Middle East as their cheapest and most reliable supplier is even less realistic. Any prolonged disruption in the Strait of Hormuz, Bab el-Mandeb, or the Suez Canal can amplify price shocks and ripple far beyond the region, pushing up inflation, slowing trade and delaying economic recovery across both developed and developing economies.

There are encouraging signs that diplomacy may yet prevail. Despite exchanging threats, the US and Iran have both indicated a willingness to resume talks. If this progresses, Hormuz may reopen. Saudi Arabia, though forming a global group to strengthen maritime security in the Red Sea amid Houthi attacks, has urged the Trump administration for restraint.

While oil multinationals are enjoying a windfall from war-induced price hikes – making an estimated $93 billion in the three months since the war began in February this year – Middle Eastern countries have suffered substantial damage to at least 80 oil and gas facilities, with some requiring up to two years to resume operations, according to International Energy Agency estimates.

The world will continue to need oil and gas. The Middle East also needs to protect its oil resources, which remain the backbone of the region's economies despite ongoing diversification efforts.

The longer a Gulf war lasts, the greater the risk for both the Middle East and energy-importing countries.

For Bangladesh, the stakes are particularly high. Its economy has grown on the back of affordable imported energy and export-oriented trade, both of which depend heavily on the Gulf and the shipping routes through Hormuz, Bab el-Mandeb, and the Suez Canal. Any prolonged disruption would arrive as higher import bills, persistent inflation, and slower economic growth. If the Gulf's oil economy weakens, Bangladesh risks losing its largest manpower market.

Bangladesh has little influence over the course of a distant conflict. What it can do is pursue a balanced foreign policy relating to the Gulf region, diversify energy sources where possible and avoid strategic choices that could jeopardise either its fuel supplies or access to key maritime trade routes.

Brent crude oil climbed more than $1 a barrel on Friday over ongoing uncertainty about the negotiations in progress that determine control of, and reopen, the key shipping artery of the Strait of Hormuz.

Brent crude futures settled at $83.55 a barrel, gaining $1.06, or 1.3 percent. West Texas Intermediate futures finished at $78.18 a barrel, up 89 cents, or 1.15 percent.

Oil futures settled more than $3 a barrel higher on Thursday as Iran reviewed a bill to ban US and Israeli vessels from the Strait of Hormuz, through which roughly a fifth of the world’s oil and liquefied natural gas normally passed before the war began at the end of February.

Oil prices fell earlier in the week as a possible solution to the conflict looked more likely, part of an on-again, off-again pattern that has persisted since the US and Israel jointly struck the nation in late February, igniting a conflict that has now stretched into a sixth month. Brent was on course for a weekly loss of more than 8 percent, while WTI lost more than 7 percent.

While this week's signals on a potential deal have sent a roller-coaster ride in market sentiment, the market remains in the dark as to what needs to happen for the agreement to be clinched, said Vandana Hari, founder of oil market analysis provider Vanda Insights.

"The market is trying to assess if an Iran-Oman agreement would allow a US-flagged vessel to transit the Strait of Hormuz," said Andrew Lipow, president of Lipow Oil Associates.

"Would it allow a US-owned vessel to go through? Would it allow a vessel headed for a US port to go through?"

Both Iran and Oman are said to have agreed on the route ships would take through the strait, which lies between their two countries. It is unclear if the US will agree to these terms.

Analysts also said that this week's developments have signalled that hostilities between Iran and the US are not yet over.

Iran is seeking fees of between 5 percent and 7 percent of the price of cargoes from ships using the strait, a senior Iranian official said.

Oman, meanwhile, is discussing fees of about 3 percent while Washington wants no fees at all.

"The longer the supply disruption goes, the longer the world's commercial reserves are being drawn down," he said.

Four industry sources have said the proposed deal is not easily workable because of US sanctions and restrictive insurance clauses on any payments.

"The structure of the Iran-Oman agreement in its current form and the power it yields to Iran is nothing that (US President Donald) Trump can accept politically," said Bjarne Schieldrop at SEB Research.

"Trump would face heavy political criticism at home if he did."

"We need that strait to be reopened fully," said John Kilduff, partner with Again Capital.

The continued uncertainty about the outcome of the war and the timing of its end keeps traders very anxious, Kilduff said.

Chinese exports and imports soared in July, official data showed Friday, as the manufacturing powerhouse benefits from a global AI boom lifting overseas demand for its tech products.

The world’s second-largest economy last year achieved a historic trade surplus of nearly $1.2 trillion, helping its manufacturing sector through a prolonged slump in domestic consumption.

The export boom has been propelled further this year by increased demand for Chinese data-processing equipment and related components, as companies rush to build artificial intelligence capacity.

Exports climbed 23.9 percent year-on-year last month, the General Administration of Customs (GAC) reported, compared with a 23.0 percent forecast by Bloomberg.

Overseas shipments of computers and related parts jumped 45.2 percent on year in the first seven months, the data showed.

“Export and import values remain elevated, helped by soaring global demand for electronics and green tech products,” wrote Julian Evans-Pritchard of Capital Economics.

China’s trade surplus appears to be on pace to match that of last year, reaching $687 billion through the end of July, the data showed Friday.

The yawning gap has increasingly raised eyebrows abroad -- particularly in Europe, where leaders worry about floods of Chinese exports squeezing out local manufacturers.

Beijing has insisted it never deliberately pursued a trade surplus.

The Communist Party’s Politburo -- the decision-making body headed by President Xi Jinping -- urged a more “balanced” trade development at a key meeting late last month.

“Export growth continued to support the economy in July,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, wrote in a note after Friday’s data.

“I expect intense negotiations between China and (its) major trading partners in coming months on what can be done to make trade more balanced,” he added.

Imports increased 27.5 percent in July, extending this year’s strong performance even as main indicators of domestic demand have remained weak.

However, that was slower than the 36 percent surge seen in June, and also missed a Bloomberg forecast of 29.5 percent growth.

The growth has been achieved despite considerable pressure on the global trading system from the war in the Middle East and simmering trade frictions between Beijing and Washington.

China’s shipments to the United States rose 17 percent year-on-year last month, Friday’s data showed, as the countries remain locked in a trade war despite efforts to ease tensions.

That brought China’s surplus with its superpower rival this year to nearly $171 billion through the end of July, according to the official data.

The latest figures come days after a fresh flare-up in trade tensions between the world’s top two economies.

Following sanctions imposed by Washington over forced labour and national security concerns, Beijing on Wednesday announced restrictions on drone exports to the United States and blacklisted six firms.

China and the United States spent much of last year embroiled in an escalating trade war but reached a truce when US President Donald Trump met Xi in October.
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The relationship will undergo further scrutiny in coming weeks as officials prepare for a scheduled state visit by Xi to the United States in late September.

The World Bank on Tuesday called on developing countries to embrace artificial intelligence technology tools to deliver better governance outcomes, warning that they risked being left behind if they failed to do so.

“AI has thrown developing economies a lifeline, and they should seize it,” Indermit Gill, chief economist of the World Bank Group, said as the organization launched its annual World Development Report.

“They do not need large models or big data centers to reap its benefits,” he added, advocating for the adaptation of lower-cost AI tools to local conditions to deliver results in the health, education, justice and agricultural sectors.

Advanced AI models -- largely developed in the United States and China -- offer the ability to quickly analyze data and automate many tasks that otherwise take skilled humans longer to do.

These AI models, however, require huge data centers and large amounts of complex computing power, using massive amounts of electricity and water -- with implications for climate change.

“Developing economies today are in the midst of their weakest average growth performance in three decades,” said a World Bank statement accompanying the report. “AI could significantly boost that performance before the end of the 2020s while delivering tangible benefits to people.”

The report calls for countries to use AI to “help extend otherwise costly medical, legal, educational, and agricultural services to underserved billions -- doing in a decade what might otherwise take a century.”

Lower-income countries have struggled through the 2020s, hit by a series of successive shocks that saw the World Bank earlier this year dub it a “lost decade” for their economic growth.

The Bank has lowered its 2026 global growth forecast to its lowest level since the pandemic, with the economic fallout of the Iran war battering countries around the world.

The shock has hit low-income and developing countries hardest, with Asia the worst-affected region.

The Bank’s new report advocates for developing countries to start working with localized AI tools and solutions now, and to invest in electricity generation and distribution; expand access to computing power; and improve the availability of local data.

“The window to get this right is narrow,” said Gaurav Nayyar, director of the report.

“AI presents a once-in-a-lifetime opportunity to solve problems that have resisted solutions for generations,” he added.

For the 6.8 billion people -- 83 percent of humanity -- who live in low-income and developing countries, AI tools will need to be adapted to meet their needs.

The report shares examples of AI applications in governance, such as to increase diabetes screening volumes in Bangladesh, or in reducing costs for Indian farmers through advanced weather forecasts.

The solutions, the report stresses, will need to meet people where they are.

“For example, AI solutions will need to be delivered through voice calls on basic mobile phones for those who cannot read or afford smartphones,” it says.

“Simply importing an AI model does not mean it will work well locally.”

The report calls for policymakers to also build public trust as they expand AI use.

“Improved public services and better learning outcomes in schools will reinforce trust -- but if AI embeds bias in government decisions or erodes data privacy, that trust will be difficult to recover,” said the statement.

The report delivers a stark warning, too: “AI could widen gaps between countries, increase inequality within them, concentrate market power, weaken trust in public institutions, and create new risks for safety, rights, and social cohesion.”

And while risks to employment in developing countries are low at the moment, it warns that in the long run AI tools could cut off economic mobility by eliminating many of the middle-class jobs that enable it.

The report was written with the aid of several of the world’s most advanced AI tools, including offerings from OpenAI, DeepSeek, Google and Anthropic, according to a disclosure.

The United ​States has ‌removed counterterrorism ​sanctions ​from two aircraft ⁠and ​three airlines ​with links to ​Iran's ​Islamic Revolutionary Guard ‌Corps, ⁠according to details posted ​to ​the ⁠US ​Treasury Department's ​website ⁠on Wednesday (5 August).

The world is on the verge of another bout of food inflation as wars in Iran and Ukraine along ​with El Nino create a perfect storm of higher costs and lower crop yields, the chief economist of the ‌United Nations Food and Agriculture Organization said.

Food prices were a key driver of the 2022 global inflation surge but have been relatively benign so far this year, even tempering in some places the surge caused by high energy costs.

This calm is likely to be temporary, however, as higher crude oil ​prices, the loss of fertiliser from the Gulf region, the shortage of diesel in some parts of the world ​and extreme weather are feeding through to costs and will show up in consumer prices, even ⁠if with a delay.

Costs seen accelerating by year-end, next year

"I expect that commodity prices will start to increase more now ... and ​food prices will start increasing by the end of the year, and next year for sure they will increase more," Maximo Torero ​told Reuters in an interview.

"The transmission from the commodity to the final food price is around three to six months," he said.

Although some commodity prices, such as wheat, maize and rice, have increased in recent months, most still reflect relatively good harvests, rather than likely difficulties in the coming year.

"The ​Strait of Hormuz is a problem that affects all the inputs of agricultural commodities, agricultural systems," Torero said. "Brent oil, because it's ​used for pumping, packaging, processing, and transportation. And natural gas because it's used for fertilisers."

Meanwhile, the damage inflicted by Ukraine on Russia's oil and ‌gas infrastructure curtails the export market for diesel and natural gas, both of them key inputs in food production.

Since commodity prices are global, this inflicts pain across the world, even if richer countries have more cash to buffer producers.

"You're hearing this in Europe, in the U.S., Brazil and in Asia," Torero said. "Tight margins are putting stress in planting decisions."

Indeed, even in the U.S., which is self-sufficient for ​most key inputs, without federal ​assistance farmers growing nine principal ⁠crops may lose $32 billion in 2027, the American Farm Bureau Federation, an industry lobby group, said.

On a per-acre basis, every crop analysed is projected to remain below breakeven in 2027, it said.

Global ​wheat and corn planting was already cut in the first three months of the Iran war, ​and some US ⁠producers have shifted to soybeans, because they require lower fertiliser inputs.

Australia, one of the world's top crop exporters, recently said that winter crop production is seen down by 21% in part because of a significant increase in both fuel and fertiliser prices and uncertainty over the ⁠availability of ​key inputs.

Meanwhile, this year's El Nino weather phenomenon is likely to be especially ​strong, significantly shifting rainfall patterns, likely impacting commodity prices and potentially pushing tens of millions into acute food insecurity.

The monsoon in India is already delayed, and below-average rainfall ​is seen this month, a potential hit for rice production that could impact global commodity costs.

India’s central bank kept interest rates unchanged on Wednesday as it waits to see whether volatile oil prices caused by the Iran war feed wider inflationary pressures.

The Reserve Bank of India (RBI) said the benchmark repurchase rate, the level at which it lends to commercial banks, would remain at 5.25 percent after a unanimous vote by a six-member panel.

Emerging and frontier market central banks from Indonesia to Sri Lanka have raised rates to curb price rises and boost their currencies since the outbreak of the Middle East crisis in February.

Limited and staggered fuel price hikes by the Indian government have so far shielded citizens from the worst of the war’s economic impact but there are signs that this may not hold.

Retail inflation rose to 4.4 percent in June -- breaching the central bank’s medium target of four percent for the first time in 17 months -- though it remains within RBI’s 2-6 percent tolerance band.

Retail inflation rose to 4.4 percent in June -- breaching the central bank’s medium target of four percent for the first time in 17 months
Bank governor Sanjay Malhotra said economic growth was supported by “resilient domestic demand” and inflation was not “broad-based” yet.

“The MPC (Monetary Policy Committee) noted that even though headline inflation is projected to increase, it is primarily on account of supply side pressures caused by food and fuel. It is not getting broad-based,” Malhotra said in a televised address from the financial capital Mumbai.

“There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action.”

Analysts said Malhotra’s speech had a dovish tinge.

“What stood out just as much as the tone itself was what was missing from it,” Sneha Pandey of Quantum AMC said. With the war still unresolved and already influencing both oil markets and yields, there were ample reasons for the central bank to express greater concern, she said.

“It didn’t... and that comfort is a genuine positive for equities.” Adding to the central bank’s calculations is pressure on the Indian rupee, which slid to a record low before its June policy meeting.

Instead of raising rates, the RBI chose to announce a range of moves aimed at wooing dollar inflows, including a deposit scheme for the Indian diaspora.

These measures have brought in more than $40 billion since June, according to central bank data released last Saturday, boosting the RBI’s forex buffers.

While the steps have helped stop the rupee’s losses, the currency has faced fresh challenges.

India, the world’s third-largest buyer of oil, normally sources about half of its crude through the Strait of Hormuz, which has been effectively closed since the beginning of the war in February.

Analysts say this makes New Delhi among the most vulnerable economies to a global energy shock, as higher crude and fertiliser prices drive up India’s import bill.

The US trade deficit narrowed slightly in June, government data showed on Tuesday, with both imports and exports contracting over the month before.

The overall trade gap came in at $73.3 billion, down 5.6 percent from May on the back of a bigger decrease in imports than exports.

The data missed expectations slightly, with Briefing.com forecasting the deficit to come in at $69.6 billion.

US President Donald Trump has sought to remake the global trade order since taking office last year, imposing a raft of sometimes eyewatering tariffs on Washington’s friends and foes alike.

Some of the tariffs have been withdrawn after being contested in court. His latest salvo faced a similar challenge earlier this week in the New York-based Court of International Trade.

The Republican billionaire has made narrowing the US trade gap by increasing exports while onshoring industries and manufacturing a key promise of this term.

In June, imports came in at $388 billion, down $7.3 billion from the month before, while exports dropped $2.9 billion compared to May.

The reduction in exports saw the biggest drop coming from crude oil and fuel oil, as energy prices fell on the back of positive negotiations in the US war on Iran in June.

Trump’s war on Iran has roiled global energy markets as Tehran’s retaliatory action has virtually closed the Strait of Hormuz, through which about a fifth of the world’s oil and gas normally travels.

Iran has also hit Washington’s Gulf allies with missile and drone attacks, affecting key energy production facilities.

Over the course of 2026 so far, the US goods and services deficit has decreased by 33.8 percent compared to the same period in 2025, mostly off the back of a 11.7 percent increase in exports.

The Indian rupee rose to its highest level in a month on Wednesday, buoyed by lower oil prices and a weaker dollar, while forward premiums dropped ahead of the Reserve Bank of India’s policy decision.

The currency opened 0.5 percent higher at 94.92 per US dollar, its highest level since July 1, and has been moving in the 94.92-95.02 range in early trade.

The Brent crude oil benchmark tumbled 5.2 percent on Tuesday, extending losses by another 1 percent in Asian trade amid comments from Qatari and US officials that fuelled hopes of a diplomatic resolution to the months-long Iran conflict.

The latest decline in crude oil prices reinforced the rupee’s positive bias, which has been building over recent sessions. Despite the recent momentum, traders said the break past the 95-per-dollar mark came as a surprise.

“I hadn’t expected the 95 level to give way,” a currency trader at a private-sector bank said.

“It appears the underlying trend has become so supportive that positive developments are having a bigger impact (on lifting the rupee) than they normally would.”

The decline in oil prices comes ahead of the Reserve Bank of India’s policy decision due shortly, where it is widely expected to leave interest rates unchanged.

Traders expect the policy outcome to have only a limited impact on the rupee, with oil prices, the dollar and RBI FX intervention seen as dominant drivers of the currency in the near-term.

Dollar/rupee forward premiums eased ahead of the policy decision, largely tracking the move in the spot market.

The one-year implied yield fell 4 basis points to 2.82 percent.

US job openings dropped in June as vacancies in the healthcare and social assistance sector declined by the most in nearly a year, but an improvement in hiring and low layoffs suggested the labor market remained stable.

The report from the Labor Department on Tuesday also showed a marginal increase in people quitting their jobs, presumably in search of greener pastures, which should limit wage growth and strengthen economists’ views that the labor market was not a source of inflation.Still, most economists expected the Federal Reserve to raise interest rates this year to tame inflation fueled by the Middle East conflict.

“The picture is of a steady labor market,” said Carl Weinberg, chief economist at High Frequency Economics. “This picture of the labor market will change as the economy adjusts to $100 plus a barrel oil, higher inflation, possibly tighter monetary conditions and global recession starting in Asia, where many production supply chains are rooted.”

Job openings, a measure of labor demand, had decreased by 178,000 to 7.359 million by the last day of June, the Labor Department’s Bureau of Labor Statistics said in its Job Openings and Labor Turnover Survey, or JOLTS report. Economists polled by Reuters had forecast 7.400 million unfilled positions in June.

Some have said the JOLTS report should be treated with caution, noting that the response rate to the survey had declined considerably.

Economists continue to view the labor market as remaining in a “slow-hire, slow-fire” mode, which they say should allow the US central bank to focus on inflation.

The Fed last week left its benchmark overnight interest rate in the 3.50 percent-3.75 percent range. Three members of the Fed’s policy-setting committee dissented in favor of a quarter-percentage-point hike.

Healthcare and social assistance job openings decreased by 147,000 in June, the largest decline since July 2025. This sector has been a key driver of job growth amid an aging population.

Temporary Protected Status for hundreds of thousands of immigrants from Haiti and six other countries has ended.

“With foreign-born labor force population driving the overall decline in civilian labor force, healthcare’s reliance on international recruitment may be exactly the sector to watch as limited labor supply increasingly shapes hiring in the labor market,” said Sneha Puri, economist at Indeed Hiring Lab.

There were 86,000 fewer open positions in the leisure and hospitality sector, mostly at hotels, restaurants and bars. There were more job openings at retailers as well as in the financial activities sector.

The job openings rate fell to 4.4 percent in June from 4.5 percent in May.

Hiring increased by 96,000 to 5.348 million, led by the healthcare and social assistance industry.

But hiring at hotels, restaurants and bars fell by 77,000, likely reflecting the fading boost from the recently ended FIFA World Cup tournament.

The hires rate rose to 3.4 percent from 3.3 percent in May.

Layoffs and discharges were little changed at 1.766 million, with the rate steady at 1.1 percent.

The number of people quitting their jobs increased by a modest 79,000 to 3.232 million.

The quits rate, viewed by policymakers as a gauge of labor market confidence, was unchanged at 2.0 percent.

A Reuters survey of economists estimates that nonfarm payrolls increased by 80,000 jobs in July after a rise of 57,000 in June.
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The BLS is scheduled to publish the July employment report on Friday. The unemployment rate is forecast to hold steady at 4.2 percent.

There is, however, a risk it could edge higher after a Conference Board survey last week showed the share of consumers viewing jobs as “plentiful” dropped in July to the lowest level since February 2021.

Bumper oil refining profits triggered by the Iran war are turbocharging Big Oil’s earnings, breathing new life into a business many investors had largely written off.

The sector looks poised to produce unusually strong returns for several years, but long-term structural changes in oil consumption mean refining’s star will likely fade quickly.

Despite occupying a critical position in the global energy supply chain, refining has long been the least glamorous corner of the oil business.

Western oil majors have steadily retreated from the sector over the past two decades, deterred by high operating costs, notoriously volatile margins, rising carbon costs and growing competition from state-backed refiners in the Middle East, Africa and Asia.

That retreat accelerated in the late 2010s, particularly in Europe, as governments and companies increasingly bet that rapid electric vehicle adoption would curb fuel demand by the 2030s, reducing the need for new refining investment.

As a result, Western oil giants’ refining capacity shrank dramatically.

Combined refining volumes for BP, Chevron, Exxon Mobil, Shell and TotalEnergies fell from 16.4 million barrels per day in 2005, representing around 22 percent of the global total, to 10.4 million bpd last year, or roughly 13 percent of worldwide crude processing, according to Reuters Open Interest calculations.

Shell has led the retreat, reducing its interests in refineries from 40 to just seven over the period.

But the refining environment has improved considerably in the past year, thanks to a spike in military conflict in several oil-rich regions.

First, there’s Iran.

The combination of the months-long effective closure of the Strait of Hormuz – which has limited refiners’ access to crude – and Tehran’s attacks on refineries throughout the Middle East have sent refining margins for gasoline, diesel and jet fuel to record highs.

The loss of Middle Eastern crude forced refineries, particularly in Asia, to cut operating rates.

While China has enormous crude stockpiles, it chose to scale back refining activity aggressively and halt fuel exports to offset its sharp reduction in crude imports.

Together, these disruptions removed roughly 5 million barrels per day, or around 6 percent, of pre-war global refining output in the second quarter.

Global refinery runs averaged around 78 million bpd, the lowest level since the depths of the COVID-19 pandemic in 2020, according to the International Energy Agency.

Meanwhile, months of relentless Ukrainian drone attacks on Russian energy infrastructure have sharply reduced Russia’s refining output, forcing Moscow to ban diesel exports.

That announcement sent diesel prices soaring.

PRICING SUPERPOWER

The combined impact of the two conflicts on refining profitability has been dramatic.

The refined product shortage has left Big Oil with enormous pricing power and encouraged operators to run plants at full capacity.

US refineries, which emerged as the world’s largest fuel suppliers during the conflict, operated at 97 percent of capacity in the week to July 24, well above their long-term average of around 90 percent.

BP’s refining-indicator margin, a gauge of global refining profits, climbed to $30 per barrel in the second quarter from $17 in the first quarter and $12 a year earlier.

The indicator has averaged $42 per barrel so far in the third quarter.

Exxon posted downstream profits of $5.5 billion in the second quarter, its strongest result since 2022, driven by record diesel production, while Chevron’s downstream earnings climbed to $4.9 billion, their highest level this decade.

Shell reported adjusted earnings of $2.5 billion for its products division, the highest this decade, as its refining network operated at a utilisation rate of 102 percent during the quarter.

TotalEnergies Chief Executive Patrick Pouyanne summed it up neatly when he told analysts late last month that the company’s refining segment had performed in “an exceptional way.”

BP reports earnings on Tuesday.

CAN IT LAST?

Most of the immediate pressures supporting these refining margins are likely to ease – the question is how quickly.

A sustainable resolution to the US-Iran conflict involving a full reopening of the Strait of Hormuz and the eventual recovery of Chinese refining activity would help loosen fuel markets meaningfully, but when that might occur is anyone’s guess.

What’s clear is that the industry’s problems cannot be repaired immediately. Fixing damage to dozens of refineries in the Middle East and Russia will take months, and in some cases years.

In the meantime, global spare refining capacity remains exceptionally thin.

There’s also reason to be positive on the demand side of the equation.

The Iran war has revived concerns about energy security.

Many governments are thus expanding strategic storage facilities for both crude oil and refined fuels to protect against future supply shocks.

Governments need to start by simply refilling inventories depleted during the conflict.

Global oil stocks fell by 5.1 million barrels per day in the second quarter and are forecast to decline by a further 2.2 million bpd in the third quarter, according to US Energy Information Administration estimates.

Rebuilding inventories of diesel, jet fuel and gasoline will likely take years, creating persistent demand.

Alan Gelder, senior vice president for refining at consultancy Wood Mackenzie, expects refining margins and utilisation rates to remain strong through the end of the decade, supported by continued growth in oil demand and a limited pipeline of new refining projects.

THE PARTY WON’T LAST

But the boom masks a deeper fragility.

Today’s windfall profits are being generated by war, damaged infrastructure and scarcity, not by a structural improvement in the industry’s underlying fundamentals.

Refiners are benefiting because the world has lost capacity faster than demand has disappeared.

But that might not be the case for long.

Several countries with limited domestic refining capability are now reassessing whether they need more local processing capacity.

Australia, for example, is already considering such plans.

Over time, those investments could create a new wave of capacity and eventually lead to oversupply.

The oil majors understand this reality.

A few years of exceptional margins may slow the decline of the refining sector.

But they are unlikely to reverse it.

Saudi Arabia, Russia and five other members of OPEC+ are expected to raise their oil production quotas for September when they meet online Sunday as the Middle East war continues to disrupt global energy supplies.

The enlarged Organisation of the Petroleum Exporting Countries will likely increase production by 188,000 barrels per day, following several months of similar hikes, said Jorge Leon, an analyst at Rystad Energy.

However, the September increase is likely to be the last in the current series of production adjustments, he said.

Between late 2022 and 2023, OPEC+ became concerned that oil prices were falling, and agreed to cut oil production in three separate rounds, reducing total output by nearly six million barrels per day.

But Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, Oman and the United Arab Emirates -- before their exit from the group on May 1 -- then changed their strategy by gradually upping production starting in 2025.

A September increase would complete the unwinding of the second of the three production-cut packages introduced by OPEC+.

However, in reality, many OPEC+ members cannot produce as much oil as their official targets allow due to a "decline in production capacity", so increasing targets has become less meaningful, said Giovanni Staunovo, an analyst at UBS.

The Gulf countries have struggled to increase exports due to the near-paralysis of the Strait of Hormuz orchestrated by Iran during the war in the Middle East -- despite a brief upswing in shipping traffic after a US-Iran memorandum of understanding was signed in June.

And in Russia, whose oil infrastructure has been repeatedly targeted by Ukrainian drone attacks, production is hovering at around nine million barrels per day -- compared with a target of 9.8 million barrels per day.

It remains unclear when the group will actually be able to increase its oil volumes, but some member countries, such as Iraq, have expressed a desire to significantly boost production.

Currently, "the group is undergoing a process in setting maximum sustainable capacity levels for all member states", according to Staunovo.

OPEC+ "faces potentially difficult talks over new production quotas" starting next year following the September increase, according to analysts at DNB Carnegie.

"I don't think cohesion is at risk at this very moment," said Leon, warning, however, that the UAE's withdrawal from the group in May has highlighted a weakness in this area.

Explaining the move, Abu Dhabi said it "serves our national interests and long-term strategic objectives".

The UAE had announced many projects and investments aimed at expanding its ability to pump oil in recent years, making it increasingly difficult to justify staying under strict OPEC+ production limits.

Gold slid 2 percent on Friday as the US dollar rebounded from a more than one-month low hit in the previous session,
though the metal was still on track for its first monthly gain in five as weaker inflation data reduced expectations of further US rate hikes.
Spot gold was down 1.3 percent at $4,049.83 per ounce at 1:40 p.m. EDT (1740 GMT), after falling 2 percent earlier in the session.US gold futures for August delivery dropped 1.3 percent to $4,107.
Gold has gained 1.1 percent so far this month, its biggest monthly increase since February.

The gains have been primarily driven by softer inflation data, which led traders to scale back expectations for Federal Reserve interest rate hikes for the year and as oil prices retreated to pre-Iran war levels earlier this month.“Although gold is on the cusp of ending a four-month losing streak, the precious metal has struggled to carve a bigger gap above the psychological $4,000 level,” said Han Tan, chief market analyst at Bybit.
The metal remains supported above $4,000 by expectations that Fed Chair Kevin Warsh may broaden the central bank’s focus beyond its preferred inflation measures and rate increases, Tan said.

Data on Thursday showed US inflation slowed in June, but the easing was likely temporary as renewed hostilities in the Middle East lifted oil prices.
Warsh this week pledged an unwavering commitment to bring inflation down without signaling a readiness to raise interest rates.The dollar was steady after dropping about 2.4 percent on Thursday, in its biggest one-day drop since January 2023.A stronger dollar makes bullion more expensive for holders of other currencies.Traders see a 65 percent chance of a rate hike in September, versus a more than 80 percent chance a week before, according to the CME FedWatch Tool.

Elsewhere, China’s market regulator urged solar companies to resist “vicious” price competition in a price compliance guidance meeting on Friday, a statement showed.

Print-outs of articles about the global memory chip shortage are pinned beside a price list at a Hong Kong computer shop, offering an explanation to confused customers feeling the pinch.

Price rises for goods such as laptops and smartphones, with cars potentially next, have been an unwelcome side-effect of the artificial intelligence gold rush -- and the squeeze is far from over.

Samsung Electronics’ chief financial officer said this week shortages of microchips that store digital data will likely deepen in 2027 and stay tight through 2028.

The crunch has been nicknamed “RAMaggedon” after the components called RAM, or “random-access memory”.

It is caused as profit-hungry chipmakers pivot to producing high-bandwidth memory (HBM) -- a more advanced type of computer memory in huge demand to help train and run AI tools.

The articles on display at In-Technology Services -- one of many compact vendors crammed into Hong Kong’s Wan Chai Computer Centre -- are to inform customers who “don’t know what happened,” manager Wade Lam told AFP.

The centre’s shops sell tech equipment of all sorts, from computer parts to gadgets and games consoles.

Ken Tam, manager of Videocom Computer, which specialises in custom-built PCs, said business has halved since price rises began in September.

Sixteen gigabytes of RAM used to cost HK$300-400 ($40-50) but the price has now hit HK$1,500, he said.

“When it suddenly gets so expensive, customers have a psychological barrier,” Tam told AFP.

“If they need it, they will buy it,” but otherwise they will wait, or “lower their standards” and buy a less high-performing memory chip, he said.

Analyst Ellie Wang at the Taiwan-based market research firm TrendForce said memory prices for PCs and smartphones were up around five to six times compared to a year ago.

The AI boom has brought humungous profits and share price jumps to the world’s top three memory chip makers: South Korea’s Samsung Electronics and SK hynix, along with US giant Micron.

In fourth place is ChangXin Memory Technologies (CXMT), which became mainland China’s most valuable company on Monday when it made its market debut in Shanghai -- another sign of how red-hot the sector has become.

CXMT, as a relative newcomer, “remains in a follower position regarding leading-edge technologies”, James Zhao, senior principal analyst at Omdia, told AFP.

HBM is used in data centre servers to support other powerful chips -- such as those made by US titan Nvidia -- that execute the dizzyingly complex calculations of AI systems.

But when it comes to conventional RAM, and a type for computers called DRAM, “the current supply-constrained market environment” could bring CXMT “late-mover advantages”, he said.

At a shopping centre in a different part of Hong Kong, customer Henry Wong, an investment banker, said he had chosen to upgrade the RAM in an older laptop instead of buying a new one with even better specs.

“After upgrading the memory, I found it ran really smoothly, and I stopped wanting to buy a new computer,” he told AFP.

Automakers say they are facing rising costs for in-vehicle computer systems, which could also soon push up the price of new vehicles.

In Tokyo’s tech hub of Akihabara, Charles Brousse, a 30-year-old graphic designer and custom PC builder from Belgium, said prices for RAM, graphics cards and motherboards have hit “ridiculous levels”.

For his “PC & Chill” service, Brousse does not buy parts to pre-build machines -- as it is too expensive -- but he requires clients to purchase their own that he assembles.

The chip shortage is pushing people to buy cheaper laptops than desktops, which can last up to a decade, said Brousse, in Tokyo on his honeymoon.

“I’m not sure that’s a good thing; people end up buying products with shorter lifespans, which fuels a cycle of consumption.”

Brousse added that the fact it is driven by the “speculative bubble” of AI is also frustrating, “because I’m a graphic designer by trade, so AI has a real impact on my profession.”

US tech giants are pouring huge sums of money into building infrastructure to maintain their leadership in AI technology. Since the rise of AI in 2023, Google, Amazon, Microsoft and Meta have invested a total of 110,000 crores, or more than 1 trillion dollars, in the sector as of last June, according to the FT.

A large portion of tech giants' AI investments are being spent on data centers, advanced chips, and the power systems needed to run this infrastructure.

The report, by Ryan McMorrow, Rafe Rosner-Uddin and Hannah Murphy, says that investment in the technology sector, centered on AI, will increase further in the coming days. The four companies plan to spend a combined $745 billion this year.

Ryan McMorrow's team says that big tech companies are rapidly moving into AI infrastructure-based businesses. Running AI models and providing computing power to customers requires a huge amount of data centers, servers, and chips. As a result, the cost of building infrastructure is also rapidly increasing.

According to market analysts, the trend of increasing spending on AI infrastructure is unlikely to stop anytime soon. However, how quickly the huge money spent on AI will translate into revenue and profits is now a big question for investors. At the same time, it has become important for companies to ensure that new investments do not put pressure on existing businesses.

In the meantime, big tech companies are starting to reap some of the benefits of their huge investments in AI. Google, Amazon, and Microsoft have seen their cloud businesses grow. They are providing computing capacity to organizations for AI use. Among their customers are AI startups OpenAI and Anthropic. As AI usage increases, demand for cloud computing is also increasing. As a result, the three companies are seeing revenue growth from this sector.

The pressure to invest in AI infrastructure is also not small. Due to the huge investment, there has been pressure on the supply system. The prices of various materials have increased. There has been a shortage of memory chips. This has also affected Apple's business.

Despite not investing heavily in the AI ​​race, rising chip prices have put pressure on Apple's product sales and profits, which has also had an impact on the stock market.

In the case of Meta, the picture of revenue from AI is a little different. The company does not have its own cloud business. However, the company is trying to reach customers more specifically by increasing the use of AI in the advertising business. As a result, Meta's total revenue in the second quarter (April-June) increased by 28 percent compared to the same period last year to $ 60.1 billion.

Meta's large investment in AI infrastructure has, however, raised some concerns among investors, with the company's shares falling 8 percent after the release of second-quarter results.

According to analysts, investors are now not just interested in seeing how much money is being spent on AI. They are also interested in seeing how much this huge expenditure can ultimately increase revenue and profits.

Meanwhile, the huge investment is having a direct impact on the companies' cash flow or 'free cash flow'. Last year, the amount of cash on hand of the four companies was $200 billion, which is less than the $237 billion in 2024.

Analysts believe that this situation may deteriorate further in the coming days. Because companies are now focusing more on infrastructure development, thinking about the future rather than profits. As a result, the companies' income margins are under pressure and they are having to take on large amounts of debt.

The report also found that Google is under similar pressure. The company's cloud business generated $11.1 billion more revenue than last year, but its free cash flow, or cash flow after expenses, has been squeezed by a massive investment in AI infrastructure.

Amazon CEO Andy Jascio told investors that building out its AI infrastructure will put pressure on the company's free cash flow for some time, as it builds multiple data centers at once. It can take about two years for a data center to be up and running and generate revenue for customers.

As a result, big tech companies' investments in AI are now facing two realities: on the one hand, revenue from cloud and advertising businesses is growing as AI usage increases, while on the other hand, huge spending on data centers, chips, and power infrastructure is putting pressure on cash.

US petroleum giants ExxonMobil and Chevron released blowout profits Friday due to the Middle East war, as executives cautioned that elevated gasoline prices will probably continue to strain consumers.

The US oil giants scored huge profit increases, illustrating that the financial benefits from supply disruptions from the US-Iran war easily offset negative effects at both companies.

ExxonMobil’s second-quarter profits more than doubled to $14.5 billion, while Chevron’s came in at $12.1 billion, more than five times the level in the year-ago quarter.

But gasoline prices sit above the psychologically important $4 per gallon level, posing political risk to US President Donald Trump ahead of the US midterm elections.

While crude prices are relatively high, executives with the two oil giants emphasized the effects of diminished refinery capacity in the wake of Iran’s virtual shutdown of the Strait of Hormuz that has led some plants to shut or reduce runs.

“I wouldn’t hold my breath here in the short term,” ExxonMobil Chief Executive Darren Woods told CNBC in response to a question about when gasoline prices will fall.

“I think we’re going to see prices consistent with what we’re experiencing for quite a while yet,” said Woods, describing a “disconnect” between crude and gasoline markets distinct from long-term trends.

“We’ve got to get the Strait opened up and then we’ve got to resupply the inventories and get things moving,” Woods said.

Chevron Chief Executive Mike Wirth described the meager state of motor gasoline inventories as part of broader dearth of refined products supplies that also affects jet fuel and diesel, among other goods.

“We’re going to see upward pressure on product pricing here into the third quarter and perhaps beyond that,” Wirth told analysts on a conference call.

With revenues of $116 billion, up 42 percent, ExxonMobil pointed to higher oil prices as a factor in its earnings, while emphasizing huge increases in refining margins.

Refining margins, the profit from gasoline and other products minus crude oil costs, “reached record levels in the quarter,” ExxonMobil said in prepared remarks that cited a nearly nine percent drop in global capacity because of war-related dislocations.

Besides lost volumes due to the Strait of Hormuz, Woods cited a drop in China fuel exports and lost Russian refining capacity following attacks by Ukraine.

While the effects from the war mostly benefited ExxonMobil, damage to key liquefied natural gas assets in Qatar dented output, Woods said on a conference call with analysts.

Woods predicted shippers will “take some time” once the Strait of Hormuz reopens to believe transit is safe, adding further to market tightness.

The strong results from US oil giants come on the heels of massive profit increases at Shell and TotalEnergies that have prompted calls in some European countries to impose windfall profits taxes.

On Thursday, the Portuguese government approved a draft law imposing a windfall profits tax on the sector, saying the funds will benefit “families and sectors most impacted by fuel price increases,” as well as supporting investments to decarbonize the economy.

Woods, a frequent critic of European environmental policies, called windfall profits taxes “short-sighted,” saying such measures would “inflict more higher costs and lower standards of living on their population.”

Chevron’s results also benefited from increased refinery margins as well as higher crude prices, which came in at an average of $96.41 a barrel on international assets, up 64 percent from the year-ago period.

Another boost compared with the year-ago period came from increased upstream production after Chevron completed the acquisition of Hess in July 2025.

But Chevron also experienced some negative impacts from the war, pointing to reduced petroleum output from the “Partitioned Zone” between Saudi Arabia and Kuwait.

Results were also dented by reduced international refining runs because of a 10 percent drop in crude oil inputs.

ExxonMobil shares fell 1.9 percent near midday while Chevron climbed 1.4 percent.

Apple shares fell nearly 10 percent on Friday after a disappointing forecast showed that the iPhone maker was struggling to secure enough components as the AI-driven data center boom strains global supply ​chains.

The drop, if sustained, would mark the stock’s worst day since the pandemic-driven selloff in March ‌2020. It would erase nearly $500 billion from Apple’s market capitalisation and return the crown of the world’s most valuable company to AI chip giant Nvidia, days after reclaiming it.

Tim Cook, widely hailed as a supply-chain genius, called the shortages “very significant” and said Apple had limited options ​to address them, speaking on his final earnings call as CEO before handing the reins to John ​Ternus in September and becoming executive chairman. “If even at Apple’s scale they are saying they are out all supply chain flexibility, it’s really bad for everyone,” said Ben Bajarin, CEO of tech consultant Creative Strategies.

Big ​Tech has been scooping up advanced chip-making capacity and memory chips to power its AI data centers, sparking shortages and ​price increases that are expected to shrink both the personal computer and smartphone markets this year.

Apple had cushioned some of the blow from surging memory costs by drawing on stockpiled inventory, but Cook said that the buffer was fading and shortages of processors were keeping ​it from meeting strong demand for iPhones and Macs.

Its forecast on Thursday for revenue growth of between 9 percent and 11 percent ​in the current quarter fell short of Wall Street’s roughly 12 percent estimate, and softer growth in its services business also overshadowed otherwise ‌strong June-quarter results.

SERVICES WEAKNESS WORRIES INVESTORS

The services weakness worried investors as it came during a stretch of strong iPhone sales, which typically feed the business that takes a cut of App Store purchases and includes everything from Apple Music to Apple TV.

That slowdown could deepen if iPhone sales take a hit from a price increase that many analysts expect during the ​launch of the new lineup, ​which typically happens in September.

“Apple’s leverage over the supply chain appears to be in question and it’s not clear that AI is serving as any measurable tailwind to products or services, with its future monetisation ​impact still uncertain,” Morgan Stanley analysts said.

“In fact, one could argue App Store softness ​might even be a result of AI re-prioritising customer time.”

Still, some analysts said that the iPhone has weathered price hikes before without denting demand significantly and that a recent US leasing deal with Klarna that offers monthly plans for Apple’s devices could soften the blow.

At least four brokerages cut their targets for the company’s stock price, while three ​raised. That moved the median view to $330, which is $3 lower than the last closing price, according to LSEG data. The stock has risen 22.7 percent this ​year as of Thursday’s close.

Disruption to shipping through the Strait of Hormuz has prompted oil-producing countries in the Gulf to accelerate plans for alternative export routes, with a series of pipeline projects announced or revived.

Here is a breakdown of the proposals.

REGIONAL PICTURE

A total of 14.95 million barrels per day (mbd) of crude oil was exported through the Strait of Hormuz in 2025, according to the International Energy Agency (IEA).

Iran exported around 1.69 mbd and is expected to continue relying on Hormuz over the long term given its effective control of the waterway, Andrew Wilson of BRS Shipbrokers told AFP.

“Iran is just going to produce as much as it can, ship as much to China as it can. It’s not really such an issue,” he said.

Of the remaining 13.26 mbd, as much as 11.5 mbd could eventually be rerouted by maximising existing pipeline capacity and completing planned projects, according to official announcements and industry experts.

SAUDI ARABIA

Before the war broke out in late February, Saudi Arabia transported around 2 mbd of crude through its East-West Pipeline linking Abqaiq, near the Gulf coast, with the Red Sea port of Yanbu, according to the IEA.

State oil giant Aramco said in March 2025 it had increased the pipeline’s capacity to 7 mbd, leaving up to 5 mbd of spare capacity. Riyadh is also planning a further expansion of up to 2 mbd, according to the US-based Institute for Energy Research (IER).

The IER said it was “unclear” whether this would involve upgrades to the existing line or construction of a parallel pipeline.

The project could potentially be completed by 2030/2031, Wilson told AFP.

UNITED ARAB EMIRATES

Before the conflict, the UAE exported around 1.1 mbd of crude through its Abu Dhabi Crude Oil Pipeline (ADCOP), which links inland oil fields with the port of Fujairah on the Gulf of Oman, bypassing the Strait of Hormuz.

The IEA said the pipeline had a capacity of 1.8 mbd, leaving an additional 0.7 mbd available.

The UAE said in May it was fast-tracking construction of a second pipeline that would run parallel to the existing route before extending to the country’s northern coast, allowing crude produced north of Hormuz to bypass the strait.

The project would double export capacity through Fujairah and is expected to enter service next year, according to the Abu Dhabi Media Office.

IRAQ

The US State Department said earlier in July that plans were under way to restore a major pipeline linking Iraq’s oil fields with Syria’s Mediterranean coast.

Washington is overseeing an international consortium “to execute the technical and financial aspects of this project”, which is expected to have an initial capacity of 2 mbd, the department said.

No timetable has been announced, however, and political and investment hurdles risk delaying the project, Wilson warned.

KUWAIT AND BAHRAIN

Neither Kuwait nor Bahrain currently has a pipeline route that bypasses Hormuz.

However, both have recently held discussions with Saudi Arabia on a possible connection to its pipeline network, according to the IER.

Oil prices closed more than $1 per barrel higher on Friday, ending July with their biggest monthly gains since March, as concerns over global crude flows mounted on Iranian reports that some tankers were forced to turn back in the Strait of Hormuz.

Brent futures settled up $1.09, or 1.2 percent, at $90.12 a barrel, while US West Texas Intermediate (WTI) futures closed up $1.08, or 1.3 percent, at $84.67 a barrel.
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For July, Brent gained 24 percent and WTI rose 21 percent.

The war in Iran, which began on February 28, has sharply curtailed traffic through the Strait of Hormuz, a vital chokepoint that previously carried about a fifth of global crude oil and natural gas supplies, disrupting millions of barrels per day of Middle East output.

Iran has largely blocked shipping through the strait since the conflict began, while its Houthi allies in Yemen this month threatened vessels transiting the Bab el-Mandeb strait at the southern end of the Red Sea, jeopardizing an alternative export route used by Saudi Arabia and other regional producers.

Iran’s Revolutionary Guards stopped two tankers from transiting the Strait of Hormuz, while four others changed course, Fars News Agency reported.

Two very large crude carriers carrying oil loaded from the Gulf exited the strait on Friday, although traffic through the waterway remained sparse, according to Kpler ship-tracking data.

Twenty-nine commodity vessels passed through the Bab el-Mandeb strait on Thursday.

“The market has stopped trading the war and started trading the shipping data,” said Ole Hvalbye, market analyst at SEB Research.

Talks between Iran and Oman on managing the strait continue, according to the Iranian Labour News Agency, despite Tehran’s rejection of Oman’s proposal for joint management of the waterway.

Research firm Gelber & Associates wrote in a note that the “geopolitical risk premium (remains) firmly in place near chokepoints like the Strait of Hormuz. Domestic supply is reinforcing the move as well, with US crude stockpiles ... down to multi-year lows.”

The note was referring to Energy Information Administration (EIA) data showing US commercial crude stocks last week fell to their lowest levels since 2018.

A drone strike that sparked fires on two gas vessels in Egypt’s Mediterranean port of Damietta also raised threats to shipping through the Suez Canal.

Saudi Arabia this week said it is seeking to lead a coalition to boost defense cooperation in the Bab el-Mandeb strait, the Red Sea and the Gulf of Aden.

Ukraine’s military said it hit Russia’s Volgograd oil refinery overnight on Friday, causing a fire at the facility.

In Kazakhstan, Tengizchevroil, the operator of the giant Tengiz field, has resumed oil exports via the Georgian port of Batumi for the first time since March, two sources told Reuters.

Crude oil output in the US fell about 2 percent in May from a record high in April, while exports hit a record high for the second consecutive month, according to EIA data on Friday.

Higher oil prices, however, dented consumption, with demand for crude oil and petroleum products falling more than 3.5 percent in May to about 20.07 million barrels per day, the lowest level since March 2025, the data showed.

A report from Baker Hughes on Friday showed that US energy firms this week added rigs for a sixth time in seven weeks. The number of active rigs is an early indicator of future output.

Separately, a Reuters survey of 31 economists and analysts showed that oil prices are expected to rise further this year.

Brent crude is estimated to average $85.22 a barrel in 2026, up from June’s forecast of $84.50, the survey showed.

India said Friday it will provide $8.8 billion in financial support for offshore oil and gas exploration as part of its efforts to reduce its heavy reliance on energy imports.

India, the world’s third-largest importer of oil and the second-largest buyer of liquefied petroleum gas (LPG), has faced major disruptions due to restrictions on the Strait of Hormuz driven by conflict between the United States and Iran.

To cushion the impact, New Delhi has expanded its pool of crude suppliers from 27 to 41 countries, including Venezuela, while increasing purchases from Russia and several African nations.

The cabinet, chaired by Prime Minister Narendra Modi, approved what officials described as a “very ambitious” push to explore vast offshore areas on Friday under India’s jurisdiction for untapped oil and gas reserves.

“If exploration is carried out properly, India can achieve substantial production,” Information and Broadcasting Minister Ashwini Vaishnaw told reporters in New Delhi.

Modi first announced the offshore exploration mission during a speech marking the country’s Independence Day in August last year.

India’s Petroleum and Natural Gas Minister Hardeep Singh Puri told AFP last month that the recent energy crunch had provided fresh impetus to India to expand its domestic supplies.

India currently meets only around 10 percent of its crude oil requirements through domestic production.

The cabinet also approved a separate plan to expand renewable energy generation, targeting 102 gigawatts of solar power capacity over the next five years through photovoltaic installations on reservoirs, canals and industrial water bodies.

India’s installed solar capacity currently stands at about 162 gigawatts, among the highest in the world.

“This programme aims to prevent 10 million tonnes of CO2 emissions,” Vaishnaw said.

Energy demand in India, home to more than 1.4 billion people, is expected to continue rising rapidly even as the government pursues its goal of achieving carbon neutrality by 2070.