10.08.2026 - Oil Reserves at 1983 Lows

Oil is back in focus.

US crude oil inventories in the Strategic Petroleum Reserve have fallen below 300 million barrels, the lowest level since January 1983, as the conflict in the Middle East drags on.

At the same time, doubts are growing again that Washington and Tehran will reach an agreement to fully reopen the Strait of Hormuz.

According to recent reports, President Donald Trump appears willing to accept an agreement with Iran without first reaching a broader nuclear deal. The immediate priority would simply be to restore freedom of navigation through the Strait of Hormuz.

However, even this appears increasingly difficult.
Trump said on Sunday that the US is currently “only semi-negotiating” with Iran, despite having insisted last week that Washington and Tehran were holding talks. He also indicated that the US could continue relying on its naval blockade to pressure Tehran rather than launching another major wave of airstrikes.

Iran, meanwhile, is taking a harder position. Foreign Ministry spokesman Esmaeil Baqaei said on Monday that the US must first lift its blockade before Tehran would agree to fully reopen the Strait.

Markets are beginning to reassess the situation. Oil prices jumped around 5% on Monday as doubts increased that the US and Iran will reach an agreement anytime soon.

This follows a decline of more than 7% last week after US Treasury Secretary Scott Bessent suggested that an agreement restoring freedom of movement through Hormuz could be reached shortly.

So far, no agreement has materialized. Instead, the positions of Washington and Tehran appear to have hardened.

Markets:

• Equities: US markets are down while Europe closed higher

• Bonds: yields move up again - US 10y yield above 4.70%, Japan 10y yield 2.81%

• Commodities: Oil prices rally, WTI around USD 82/barrel and Brent around USD 87/barrel

  Precious metals prices continue the rally, gold above USD 4’380/oz, silver trades above USD 66/oz

• Currencies: US dollar gets stronger, Japanese Yen weakens again, USDJPY 159

• Cryptos: falling - Bitcoin back towards USD 64k

• Volatility: The VIX index with minor change above 15 (good hedging level)

My View: There is no surprise to me that oil is back in focus.

For weeks, I have highlighted that this conflict is far from settled and that reaching a sustainable agreement will be extremely difficult.

I have also repeatedly pointed to the combination of falling US oil reserves and oil prices that, in my view, have not adequately reflected the geopolitical reality. With the Strategic Petroleum Reserve now at its lowest level since 1983, the room to cushion another major oil shock has become increasingly limited.

I do not expect the Strait of Hormuz to fully reopen anytime soon.

Trump needs to find a solution. So far, however, the situation is arguably worse than before the war began at the end of February. Iran still holds considerable leverage through the Strait of Hormuz, unless the economic damage at home eventually forces Tehran to compromise.

But there is an important asymmetry: an oil price shock can inflict significant damage on the entire global economy, while Iran's economic crisis remains primarily a domestic problem.

That makes the current situation particularly dangerous for financial markets.

Higher oil prices feed directly into the key risks markets are already facing:

Higher oil prices → higher inflation → higher bond yields → greater probability of rate hikes → weaker consumers → pressure on financial system → pressure on equity valuations.

And with US Treasury yields already moving back above 4.70%, another sustained rise in oil prices could quickly become a much broader market problem.

This is not the time to chase risk assets.

I continue to favor elevated cash allocations, precious metals and appropriate hedging while waiting for better opportunities.

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