Crude Gains as US-Iran Hostilities Ignite the Strait of Hormuz

Brent crude for November delivery traded above $90 a barrel in early Monday trading on 31 August, after US forces struck two Iranian rocket launchers on Larak Island on Sunday and Iran's Islamic Revolutionary Guard Corps (IRGC) answered with missiles aimed at two US bases in Jordan. The exchange ended weeks of relative calm and reversed the direction of a week in which Brent had fallen 5.4%. It also lands at the front of a dense calendar that closes with the August US Nonfarm Payrolls (NFP) report on Friday, 4 September.

The timing matters more than the size of the move. Last week traders had reframed the Iran conflict as a sanctions confrontation rather than an immediate threat to physical supply, and priced crude accordingly. Sunday tested that reading directly.

Here’s a deeper dive into the week ahead: 

TL;DR

• US Central Command (CENTCOM) said it struck two Iranian launchers preparing to place sea mines in the Strait of Hormuz, and the IRGC retaliated against two bases in Jordan.

• Brent and WTI prices both fell across last week. The weekend strikes partly reversed that move.

• Futures pricing put the odds of a US rate increase at the 15 to 16 September meeting at about 60% on Monday.

What Happened?

US forces struck two Iranian launchers on Larak Island on Sunday, 30 August, after IRGC forces were observed preparing to launch rockets carrying sea mines into the Strait of Hormuz, CENTCOM spokesman Captain Tim Hawkins said. CENTCOM had completed clearing sea mines from international shipping routes in the strait the previous week.

Iran responded within hours. The IRGC said a combined missile and drone operation called "Punishment of the Aggressor" hit the King Hussein and Al Azraq bases in Jordan. Jordan's military said air defence systems intercepted eight missiles that breached the kingdom's airspace at dawn on Monday. Iranian state media claimed extensive damage, while US accounts said nearly all incoming missiles were intercepted, and neither assessment has been independently confirmed. Iranian state broadcaster IRIB said the Larak strike killed and wounded fighters and civilians, though no precise toll was given. CENTCOM said on Monday that it had taken "limited, precise action" to prevent Iranian forces from laying mines.

It is the first exchange of fire between the two sides since late July, in a conflict now in its seventh month. Separately, an unidentified projectile struck a tanker north of Khasab, Oman, on Saturday, 29 August, with the United Kingdom Maritime Trade Operations reporting no casualties and no environmental impact. (Source: Gulf News)

The Week Before Told a Different Story  

The expiring October Brent contract settled at $89.31 a barrel on Friday, 28 August, a fall of $0.39 or 0.43% on the day and $5.08 or 5.4% across the five sessions, from the previous Friday's $94.39. West Texas Intermediate (WTI) for October delivery settled at $83.40, down $0.13 or 0.16% on the day and $3.66 or 4.2% on the week, from the previous Friday's $87.06. The October Brent contract expired on 28 August, so Friday's $89.31 settlement and Monday's November quote are different contracts and are not directly comparable.

Brent has covered a wide range this quarter, with spot as low as $69 on 2 July and as high as $105 on 23 July, and the front-month contract began 2026 at $61 a barrel, so ~$89 sits nearer the middle of the conflict-era band than the top. That weekly decline had a clear rationale behind it. Goldman Sachs estimated Persian Gulf crude exports had recovered to roughly 15 to 16 million barrels a day, against pre-conflict volumes of 22 to 24 million and a March low of about 5 to 6 million. The strait carried roughly a fifth of global oil supply before the conflict. Iran and Oman said their foreign ministers had discussed a proposed framework for a joint temporary navigational corridor through the strait and a joint mine-clearance project, although Tehran stressed the arrangement does not imply an immediate reopening. Moreover, an Iranian deputy foreign minister said on Saturday that the United States must fulfil its commitments before Hormuz reopens, and that Tehran is in no hurry.

The policy backdrop had also shifted away from military action. Last week the US administration announced a push to isolate Iran financially through secondary sanctions on countries and companies that do business with Tehran. The United Kingdom Maritime Trade Operations issued three warnings of projectile strikes on shipping near the Omani side of the strait in the final week of August alone, and Iran maintains the waterway is closed.

Hormuz is not the only supply story. Ukrainian strikes on Russian refineries have been disrupting that country's energy infrastructure and could constrain its ability to ship crude and refined products. The global diesel market is unusually tight as a result, with prices at historic highs, refining margins at record highs, and little spare refining capacity to absorb another outage. A crude rally that also tightens products reaches the inflation numbers faster than one that does not. OPEC and its partners approved a 188,000 barrel a day increase for September at their 2 August meeting, completing the rollback of the group's 2023 layer of voluntary cuts.

The physical picture and the price have been moving at different speeds all month. Exports have recovered materially from the March trough and remain well below pre-conflict levels. Neither of those facts changed over the weekend.

How Energy Volatility Obscures the Fed's September Policy Path

Futures pricing put the probability of a quarter-point increase at the 15 to 16 September Federal Open Market Committee (FOMC) meeting at about 56% at Friday's close on 28 August, up from roughly 35% before Fed Chair Kevin Warsh's Jackson Hole keynote that morning. By Monday 31 August 2026 morning that had risen to about 60%. Three members had already dissented at the July meeting, so the committee was split before Warsh spoke. Warsh said the summer's better-than-expected inflation readings did not show underlying trends improving meaningfully, said he would be hard pressed to describe broad financial conditions as restrictive, and listed the recent rise in overall commodity prices among the factors bearing watching for upside inflation risk. He gave no explicit guidance on the September decision, telling the audience not to call his remarks forward guidance.

Core PCE rose 3.3% in the year to July and the headline index rose 3.7% over the same period, both well above the 2% target.The July ISM services report put its prices index at 70.3% while its employment index sat in contraction at 47.4%. Energy sits in the headline inflation measure rather than the core measure, but it reaches core with a lag through transport and input costs.

A supply-driven price increase is the input a policy interest rate addresses least well, because raising rates does not add barrels. That is the distinction that separates an energy market in a conflict zone from a demand-led price cycle. The AAA national average for regular petrol was $4.09 a gallon on 27 August, and August was the first August on record in which the national average stayed above $4 every day. A committee already leaning towards tightening on inflation grounds now has an energy channel reopening in the fortnight before it meets.

What Moved Alongside Oil

The larger commodity move last week was not in energy. Gold fell 3.14% to about $4,456 an ounce on Friday, 28 August, and spot silver declined 4.24% to $66.21. That came after a run of roughly 13% across August, which had gold on course for its strongest monthly advance since 1999. Both moves followed the shift in rate expectations rather than anything in the Gulf, which is a useful reminder that safe-haven assets can trade on policy and on geopolitics in the same week and not always in the same direction.

The S&P 500 closed at 7,711.76, higher by roughly 0.5% across the week. The Cboe Volatility Index closed at 14.43 after falling as low as about 14.1 intraday, its lowest reading of 2026.

What to Monitor This Week 

Besides the developing situation in the strait, several scheduled releases may shape how the week is read (week of 31 August 2026).

Tuesday, 1 September

The ISM manufacturing Purchasing Managers' Index (PMI) for August is scheduled for 10:00am Eastern Time, with the July reading at 55.6%, the highest since May 2022. Job openings data for July is scheduled for the same slot. Euro area flash inflation for August is also due, with the July annual rate at 2.9%.

Wednesday, 2 September

Private payrolls for August are scheduled for 8:15am Eastern Time. The Bank of Canada (BOC) announces its policy decision at 9:45am Eastern Time, with the overnight rate currently at 2.25% and a press conference following at 10:30am Eastern Time. The Energy Information Administration (EIA) publishes its Weekly Petroleum Status Report, including US crude inventories, at 10:30am Eastern Time. The agency's August outlook forecast Brent to average about $85 a barrel in the third quarter and did not expect Middle East production to approach pre-conflict levels until early 2027. The Reserve Bank of New Zealand (RBNZ) also announced, having raised its official cash rate to 2.50% on 8 July.

Thursday, 3 September

The ISM services PMI for August is scheduled for 10:00am Eastern Time, with July at 54.1%. Weekly jobless claims are scheduled for 8:30am Eastern Time.

Friday, 4 September

The August Nonfarm Payrolls (NFP) report is scheduled for 8:30am Eastern Time and is the last major labour reading before the FOMC meets. July payrolls fell by 23,000and the unemployment rate was 4.1%, and the Bureau of Labor Statistics (BLS) marked down employment for the year through March 2026 by 79,000 in a preliminary benchmark revision published on 28 August. Canada's jobs report is scheduled for the same time.

Weekend Risk

OPEC and its partners meet on Sunday, 6 September, after this week closes. Positions carried through Friday sit across that decision.  

Conclusion  

Two things are now moving at once. The Strait of Hormuz has produced an exchange of strikes for the first time since late July, and the Federal Reserve is being priced closer to a rate increase than a hold. Friday's payroll report is the week's only scheduled event large enough to settle the second question. Nothing on the calendar settles the first.

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