Crude oil price forecast: can Brent break $90 as Iran tensions flare again?

Oil’s rebound is reviving the inflation problem markets thought was beginning to fade.

Brent crude climbed to $88 a barrel on Tuesday, its highest since July 31, while West Texas Intermediate reached $82.45 after both benchmarks surged about 5% on Monday.

The move followed a fresh deterioration in US-Iran diplomacy, with President Donald Trump adding compensation demands to an already difficult negotiation over ending the conflict and reopening the Strait of Hormuz.

Wednesday’s US inflation report could now decide whether a weaker labour market is enough to keep the Federal Reserve on hold in September, or whether renewed energy pressure forces rates back into the conversation.

Oil turns diplomacy into an inflation trade

The latest crude rally is less about an immediate change in physical supply than a reassessment of how quickly normal shipping can return through Hormuz.

Iran says an agreement with Oman on new shipping lanes is close, but a wider settlement with Washington remains unresolved.

Trump’s response to Iranian conditions has made a quick breakthrough look less likely, leaving traders to price a longer period of constrained Gulf flows.

Hormuz is the world’s most important oil transit chokepoint.

The US Energy Information Administration says roughly 20 million barrels a day passed through the strait in 2024, equivalent to about 20% of global petroleum liquids consumption.

IG market analyst Tony Sycamore sees the negotiations as a prolonged test of which side is prepared to concede first. His view is that crude could remain volatile while the political impasse persists.

Brent settled at $87.72 on Monday after a 5% jump, while WTI ended at $82.13.

Tuesday’s move extends a sharp rebound from last week, when hopes of a shipping agreement briefly pushed the geopolitical premium lower.

CPI now carries a bigger burden

The oil rebound raises the stakes for Wednesday’s July consumer-price report, scheduled for 8.30 am ET.

Economists expect headline CPI to rise 0.1% from June and core prices to increase 0.2%.

June headline inflation slowed to 3.5% year on year and core inflation eased to 2.6%, helped by cheaper energy.

A sustained crude rally would not feed through to consumer prices immediately, but it could lift inflation expectations and make policymakers less comfortable treating July’s weak jobs report as a reason to stay patient.

Fed-funds futures put the chance of a September rate increase close to even after the probability fell sharply following Friday’s payrolls data.

Capital Economics economist Jonas Goltermann sees the risk around CPI tilted towards a stronger reading, which could revive rate-hike expectations and concerns about weak growth arriving alongside persistent inflation.

The tension is clear, as the US economy unexpectedly lost jobs in July, but energy prices are climbing again.

A soft CPI reading would reinforce the bond-market relief that followed payrolls. A hotter number would put stagflation risk back in focus.

Asia drifts as rates complicate the AI trade

Asian equities reflected uncertainty rather than outright risk aversion. MSCI’s broadest Asia-Pacific index outside Japan was about 0.2% higher, while South Korea’s KOSPI gained around 0.3%.

S&P 500 and Nasdaq futures also edged higher.

Investors in Australia were awaiting the Reserve Bank’s August decision, due at 2.30 pm AEST. The cash rate stands at 4.35%, with markets broadly expecting policymakers to hold.

The yen traded weaker than 159 per dollar. Nomura analysts see intervention risk limiting an immediate break above 160, although persistent dollar buying on dips suggests pressure on the currency remains.

Another rate-sensitive story came from Nvidia.

The chipmaker has partnered with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR on financing platforms targeting more than $500 billion of third-party capital for AI infrastructure. Nvidia can backstop as much as 25% of potential deals.

The programme shows how the AI boom is expanding from an equity story into a credit and infrastructure-financing trade.

It also gives markets another reason to care about rates: expensive capital makes the data-centre build-out supporting technology valuations harder to finance.

For Tuesday, oil remains the immediate signal. If Hormuz negotiations deteriorate further, $88 Brent could turn from a geopolitical headline into a renewed inflation problem just as the Fed weighs whether the labour market has weakened enough to stop tightening.