Monthly Outlook: Fed, Crypto, Oil

Iran war and oil disruption

The world is six months into the Iran war. In that time, ceasefire agreements have broken down, while the US offensive has shifted from airstrikes to economic sanctions and naval blockades. The situation remains fluid and susceptible to change.

What has not changed is that another oil shock remains the biggest risk to inflation and interest rate outlook.

In August, the International Energy Agency (IEA) estimated that the global oil market would face a supply deficit of 1.8m barrels per day in Q3 2026, more than double its July estimate of 800,000 barrels per day.

The sharp revision goes to show just how difficult it is to forecast the oil markets right now. Conditions are constantly changing, as highlighted by IEA’s report that an expected recovery of Gulf oil supply following the June ceasefire was disrupted by renewed hostilities.

The global oil market has relied partly on existing inventories to bridge the gap between supply and demand. But the IEA has warned that the inventory buffers are “rapidly depleting” and noted the urgency of the re-opening of the Strait of Hormuz.

Following the expiration and non-renewal of the ceasefire between the US and Iran on 17 August, the Hormuz Strait Monitor reported that the Strait was operating at 1% of pre-war traffic with “effectively zero tankers moving.” At the same time, tankers using the Red Sea as an alternate route to transport crude have faced persistent missile attacks from the Yemen-based Houthi group.