U.S. President Donald Trump would have dominated the July 7-8 NATO Ankara Summit in almost all circumstances but renewed high intensity U.S. military activity around the Persian Gulf dramatically shifted much of the world’s focus once again towards the flow of Middle East energy supplies and away from core NATO issues.
Renewed fears over disruption of Persian Gulf energy supplies instantly moved to the top of global concern, especially since 20 days have passed since the June 17 signing of the U.S.-Iran Memorandum of Understanding (MoU) formally ending the conflict and next to nothing has been resolved in the MoU’s formal 60-day negotiating period, which is extendable, fortunately.
Energy market reaction to early reports of Iranian attacks on three ships attempting to transit the Strait of Hormuz in the July 6 -7 period was not excessive but concern increased steadily when the stricken vessels were reported to be using the Omani (southern) route, thought to be safer but not formally under U.S. naval protection. In some ways the energy markets had become slightly de-sensitized as a limited number of skirmishes had been occurring throughout the ceasefire period, but daily Hormuz transits had risen to around 50, although many days saw less movement.
Reaction to news of the U.S. strikes on the night of July 7-8 was substantially more intense, with the added complication being the presence of NATO leaders in Ankara and focused media attention on the Gulf and President Trump’s statements. Even so, markets appear to be treating the price increases of around five percent this week as a blip, even after another 90 U.S. airstrikes on Iran on the night of July 8-9, this time with a wider geographic focus than just the coastal region. Brent crude (September) approached $79 on July 9, not enough to be considered a “surge,” as some in the media have described it, and still well below the $100-$120 range during the period of active hostilities earlier this year.
U.S. oil sanctions re-instated
An additional factor that may boost oil prices in the mid-term was the Trump administration’s decision to re-impose U.S. oil sanctions on Iran, effective July 7, which had been administratively suspended after the MoU took effect. These are not new U.S. oil sanctions, but essentially a withdrawal of the temporary general license, often called a “waiver,” applied to existing U.S. oil sanctions under the MoU so Iran could begin oil exports. Because Iran had begun selling oil free of U.S. sanctions under the June 17 MoU, Washington is allowing a grace period until July 17 for authorized Iranian oil shipments to reach their destinations without penalty or fear of seizure (also called the wind-down deadline).
So far, Iran has limited its retaliatory strikes to U.S. bases and communications infrastructure in Kuwait, Qatar and Bahrain with no casualties reported and some analysts are focusing on this as a signal that Tehran hopes to prevent further escalation and broader economic disruption.
Global recession averted?
At this point the world has been overloaded by daily speculation from “experts” on the global economic impact of every new development in the Persian Gulf region, mostly ending with an answer such as “it depends on when Hormuz fully reopens.” And usually, the latest economic projections are out of date by the time they are released. It so happens the IMF released its July economic estimates concurrently with the new hostilities, without factoring those in. In its July 2026 World Economic Outlook Update, the IMF lowered its 2026 global growth forecast to 3.0 percent, down from 3.1 percent in its April forecast, largely because of the economic fallout from the Middle East conflict. In the new update, a global recession may well be avoided. The IMF used an annual average figure of approximately $94 per barrel (Brent crude) for its latest 2026 estimate, so a large question mark remains.
The IMF still expects global growth to recover to 3.4 percent in 2027.
An end to the cycle of escalation?
Whether the cycle of escalation can be limited at this point is an open question in view of Trump’s declaration in Ankara that the MoU was no longer in force and personal attack on Iranian leaders as “scum” and unworthy of further negotiations.
Even so, nobody believes Trump will fully abandon his painfully negotiated MoU, despite its deep flaws, before U.S. midterm elections due to the overriding political requirement to keep oil prices as low as possible, which the Iranians have skillfully manipulated, as any opponent of a U.S. President in this situation would try to do.