Brent leapt 5% in a day when the US-Iran ceasefire fell apart this week. The oil majors are about to report their fattest profits in years. And the same president who keeps warning that prices could spike also keeps promising they’ll fall within weeks. Watch what moves the market, and a question starts to nag: is this a war premium or is someone playing it?
Oil doesn’t just have a price. It has a mood, and this week the mood swivelled again. On Tuesday, Iran hit a tanker near the Strait of Hormuz. Washington answered with fresh strikes and pulled the sanctions waiver that had let Iranian crude flow. Brent (Brent crude oil), the international benchmark, jumped 5.2% on Wednesday to settle around $78 per barrel, its sharpest daily gain since May. By Thursday it had drifted back below $73. Whiplash, in other words, of the kind that has defined this market all year.
Keep some perspective on the numbers. Even $78 is a long way below April’s $126 peak, when the war first shut the strait. But it’s higher than it was a fortnight ago, when a fragile ceasefire had coaxed prices back towards pre-war levels. The market keeps trying to relax. Something keeps stopping it.
Here’s this thing I can’t shake, and I’ll put cards on the table because you should know where I’m coming from: I do not think this is limited to only geopolitics. I think there may be a hand on the dial.
The President Who Wants It Both Ways
If you followed what Donald Trump actually said over the past few weeks you would notice that the pattern is hard to miss. Standing at the NATO summit, he declared the ceasefire over and warned that oil could climb further, even hinting that US strikes could hit Iran’s Kharg Island export terminal. Serious words. The kind that put a premium on every barrel. Then, almost in the same breath, he told CNBC the opposite. Prices would fall.
“They’ll be up a little bit, and this will end very quickly,”
he said.
“We have an oil glut right now.”
So which one is it? Higher, because the strait is on fire? Or lower, because the tankers are leaving and there’s a glut? He has said both inside a single news cycle, and the market lurched each time. A president who moves crude with a sentence, then moves it back with the next, is not a neutral observer of the oil price. Whether by design or temperament, he has become a variable within it.
Now I am not going to dress a hunch up as proof. I cannot see inside anyone’s head, and market manipulation is a specific legal claim that I am not making. But there’s a mid-term election on November 3rd, and as Berenberg’s chief economist Holger Schmieding dryly noted this week, Trump wants low oil prices going into that vote while Tehran covets the sanctions money. Cheap petrol wins swing states. A well-timed threat lifts your energy sector’s earnings. Both can be true. Neither requires a conspiracy, just incentives, and incentives are usually the better explanation anyway.
Who’s Laughing on the Way to Earnings Season
While everyone else is wincing at the pump, one group is delighted. The oil sector is heading into earnings season expecting a 122% jump in profit against the same quarter last year. That is nearly double the 63% the tech sector is forecast to post, and tech is supposed to be the great growth story.
Shell and ExxonMobil signalled on Tuesday that their second quarter numbers should beat forecasts. The logic is old and reliable: companies earn more, investors pay more, shares rise. It’s the arithmetic underneath the whole S&P 500, which is expected to post 23.3% earnings growth over last year, a seventh straight quarter of double-digit gains.
Volatility isn’t just a bug for the majors. It’s the harvest. Every spike widens the gap between what they pay to pull oil out of the ground and what they sell it for. The chaos that raises your heating bill is, for Shell’s shareholders, simply a good quarter.
The Deeper Logic That No One Campaigning Wants to Say
Step back from the week we have just had and the war makes an argument the politicians will not. Every disruption in the strait is a live demonstration of why hanging your economy on oil is a strategic weakness.
An electron does not care where it came from. It can be made from gas, coal, nuclear, solar or wind, and once it’s on the grid, nothing downstream knows the difference. Oil has no such flexibility. It has to move, by tanker, through checkpoints, past whoever happens to control the waters that week. Hormuz alone carries around a fifth of the world’s traded oil. One waterway, one pressure point, and the whole system flinches.
Electrify, and you swap that single point of failure for a menu of options. China worked this out years ago and rapidly electrified its economy, which is a large part of why an oil shock now barely dents its growth. Energy security, it turns out, is just another word for not being held hostage by a strait you do not control. The cleanest thing about clean energy might be that nobody can blockade the wind.
Now Look Out the Window
Here is where it stops being abstract. As I write, Britain is in its third heatwave of the summer. On Tuesday the Met Office logged 35.1C at Wisley in Surrey, the eighth day above 34C this year, a new national record for the most extreme-heat days in a single calendar year. The alert runs until the weekend.
Across the channel it’s been lethal. June’s heatwave killed an estimated 2,025 people in France alone in a single week, with excess deaths across France, Belgium and the Netherlands topping 3,700. One preliminary study put the continent-wide toll near 20,400. World Weather Attribution, the scientists who model these things, called it virtually impossible to explain without climate change, and ruled El Niño out as the cause.
Europe is the fastest-warming continent on Earth, heating at roughly twice the global average. The forecasts now being modelled for the coming years include the once-unthinkable: parts of southern Europe edging towards Gulf-style summers, with the worst-case scenarios pushing towards 50C. Saudi weather, in Seville. Think about that for a second. And here is the loop that should make anyone feel uneasy. The heat drives demand for cooling. Cooling drives demand for power. When that power still leans on fossil fuels, and when every geopolitical flare-up makes oil more profitable to pump, the incentive to keep drilling only hardens. We burn more to survive the heat that burning created. It’s essentially a machine that feeds itself.
The East London Angle
None of this stays in the Gulf, and it lands unevenly. When Brent jumps, petrol and diesel follow within weeks, and the pass-through hits hardest where the budgets are already thin. In Newham and Tower Hamlets, among the most deprived boroughs in London, a 10% move in crude isn’t just a headline. It is a choice between the bus fare and the electric meter.
The heat lands unevenly too. East London is dense, grey short of tree cover, and green space, which makes it an urban heat island: concrete holds warmth, and the temperature runs measurably hotter than the leafier boroughs a few miles west. The families least able to afford air conditioning are the ones living where they’ll most need it. Neither the oil premiums nor the heat is distributed by fairness. Both flow downhill, and East London sits at the bottom of its slope.
Where I Land, and What I Would Do
Let me be careful about what I’m claiming. I can’t prove the oil price is being engineered, and I won’t pretend that a market of this size dances to one man’s tweets alone. Supply, OPEC+, the physical state of Hormuz, all of it matters. But when the same politician talks prices up and down within a single day, and the market jumps on it both times, you’re entitled to ask who actually benefits. This week, the answer was the oil majors, and it usually is.
My read for the months ahead: expect more of this. Volatility that serves the incumbents, a floor under prices whenever the Gulf twitches, and a fossil sector booking record profits while the planet posts record temperatures. The two headlines will keep running side by side, and almost nobody will draw the line between them.
So, draw it yourself. The way out of a market that can be jerked around by one strait and one man is, the same way out of the climate spiral: stop depending on the fuel that makes both possible. Every solar panel is a barrel nobody can blockade. Every heat pump is one less hostage to Hormuz.
The oil majors are having a wonderful quarter. The rest of us are having a 35-degree July. These are not two separate stories. They’re one, and the sooner we stop paying to keep it running, the sooner it stops.
