Trump threatens indefinite Iran blockade, but oil still cannot crack $88: here's why

Oil prices were little changed below $88 a barrel on Friday, even after the United States warned that its naval blockade of Iran could be maintained indefinitely.

Brent stood near $87.08 after settling at $87.07 on Thursday, when it snapped a six-session winning streak.

The benchmark had briefly touched $90 earlier this week as hopes for a quick resolution to the Strait of Hormuz standoff faded.

Weaker demand forecasts and a US inventory build are giving traders reasons to resist chasing crude higher without another physical disruption.

Iran risk is huge, but much is already priced in

The United States said Thursday that its navy could maintain the blockade indefinitely by rotating ships through the region as ceasefire talks remain stalled.

Traffic through Hormuz is severely constrained. As per local reports, eight vessels crossed on Tuesday, compared with 130 to 140 ships a day before the war.

Iran has also attacked vessels attempting to transit the waterway.

Samer Hasn, senior market analyst at XS.com, described the backdrop as a state of “no peace and no war” in comments reported by The Wall Street Journal.

He said escalation risk should keep a geopolitical premium embedded in crude, even as weaker demand forecasts and rising US inventories limit gains.

Iran risk can therefore keep Brent near $87 without automatically sending it through $90 again.

A 17.4 million-barrel surprise changed the conversation

US commercial crude inventories jumped 17.4 million barrels to 424.4 million in the week ended August 7, according to the Energy Information Administration. Analysts had expected stocks to decline.

Higher imports and weaker exports accounted for much of the increase, but the scale of the build forced traders to focus on the physical market.

David Morrison, senior market analyst at Trade Nation, said that the latest inventory data from the US Energy Information Administration showed a significant, and unexpected, jump in crude inventories.

"US commercial crude inventories posted their largest weekly gain since January 2023 as exports slumped," Morrison told Invezz.

The International Energy Agency expects global oil demand to fall by 1.6 million barrels a day in 2026 after cutting its second-half estimate by around 550,000 barrels a day from July.

Elevated fuel prices and disrupted supply chains are weighing on consumption.

OPEC remains more optimistic, but it also cut its forecast for 2026 demand growth to 580,000 barrels a day, its fourth consecutive downgrade.

Oil may need a fresh supply shock to break $90

The blockade is no longer new. Iran’s exports have been curtailed and Hormuz traffic has collapsed from pre-war levels.

Tougher rhetoric from Washington does not necessarily remove additional barrels from the market immediately.

For Brent to hold above $90, traders may need a new physical catalyst: another sharp fall in exports, attacks on energy infrastructure, deeper disruption to Gulf shipping or evidence that shortages will persist longer than expected.

The bullish counterargument remains significant. The IEA expects global oil supply to fall by about 4.3 million barrels a day this year, more than its projected decline in demand.

Susan Bell, senior vice president for oil commodity markets at Rystad Energy, said that geopolitics was preventing a sharper price decline despite bearish US inventory data.