International oil markets proved remarkably unconcerned about the escalation of the crisis in the vitally strategic Straits of Hormuz, the choke point in the Mideast Gulf for around a fifth of the world’s oil supply.

Oil traders were more concerned about the slowdown in the global economy and increasing supply from the US and Libya in particular. After briefly topping 70/bl, benchmark Brent crude futures dipped to close out the month at $63.46/bl on July 26, down around $3/bl from the end of June.

According to the International Energy Agency, year-on-year oil demand growth averaged just 0.6% in the first half of 2019 half the rate seen in 2018. The IMF added to the gloom, trimming forecasts for economic growth in 2019 and 2020, particularly for emerging market and developing economies.

A descent closer to $60/bl was prevented by the seizure of the UK-flagged Stena Impero by Iranian military forces in retaliation for the UK’s decision to impound a tanker carrying Iranian crude off Gibraltar. The action exposed splintering alliances on both sides of the US-Iran confrontation.

Mindful of its stance to distance itself from President Trump’s unilateral sanctions on Iran, the UK has sought a coalition with European partners to safeguard shipping in the region. The irony of this move just as new UK Prime Minister Boris Johnson unveils his pro-Brexit government is not lost on Germany and France. They argue for a continued preference for negotiation with Iran rather than military escalation. Yet Tehran sees little encouragement from ineffectual European efforts to cushion it from the financial impact of US sanctions.

UK retail prices for diesel and petrol pushed higher in July, but looked ripe for a correction lower, as the losses on international markets filtered through. The international gasoline market may have peaked relative to crude as US demand starts to dip. The prospects for UK pump prices are now as much at the mercy of the sterling/dollar exchange rate as the underlying relatively stable oil prices. The pound slumped on the increasing prospects of a no-deal Brexit to two-year lows with no clear idea of just how low it might go.

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