Economists at MUFG believe oil prices remain vulnerable to fresh gains despite Friday’s sharp pullback, warning that disruption to global shipping routes is becoming a bigger driver of the market than the direct loss of crude supply.

The WTI crude price in US Dollars (OIL/USD) traded at $85.88 on Friday after retreating from Thursday’s spike to $92.09, but prices remain almost 23% higher in July following escalating tensions involving Iran, the Red Sea and the Strait of Hormuz.

The latest surge in crude prices has been fuelled not only by continued US strikes on Iran but also by growing threats to shipping routes that carry energy supplies around the world.

MUFG says geopolitical risks have broadened well beyond the Middle East.

“Oil climbs as geopolitical risks extend beyond the Middle East.”

The bank notes that Houthi attacks in the Red Sea, tanker incidents near the Strait of Hormuz and strikes on Russia’s Black Sea export infrastructure have all combined to increase uncertainty surrounding global energy transportation.

Although the Strait of Hormuz remains open, MUFG says commercial shipping has already been affected.

“Commercial shipping through the waterway has declined sharply.”

According to the bank, several tanker operators have altered routes to avoid the Red Sea, increasing transport costs and reducing the efficiency of global energy flows.

Rather than focusing solely on crude production, MUFG believes investors should pay closer attention to transport infrastructure.

“The widening geographic scope of supply disruptions suggests oil prices are increasingly being driven by global transportation risks.”

The chart above highlights the sharp jump in oil prices following renewed attacks on shipping and energy infrastructure, before Friday’s partial correction.

The bank argues that attacks on the Caspian Pipeline Consortium terminal on Russia’s Black Sea coast reinforce the risk that supply disruptions are spreading beyond the Gulf region.

Combined with falling tanker traffic through Hormuz, that leaves oil markets increasingly sensitive to any further escalation.

While Friday’s retreat suggests some profit-taking after this week’s rally, MUFG believes downside risks remain limited as long as transport disruptions persist.

“Oil prices are increasingly being driven by global transportation risks, leaving the market vulnerable to further upside if geopolitical tensions persist.”

The bank believes a sustained disruption to shipping through either the Strait of Hormuz or the Red Sea would continue to tighten physical markets, even if headline crude production remains relatively stable.

The one-year chart shows the extraordinary volatility in oil prices during 2026, with July’s rally reversing much of June’s sharp decline as geopolitical risks returned to dominate trading.

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