Let's talk about what's really going on with oil right now, why all dips are likely temporary, and why it could still be one of the strongest trades of the year.

The US-Israel campaign against Iran began in late February with heavy strikes that killed Supreme Leader Khamenei and directly targeted the regime. After months of fighting, broken ceasefires, and tit-for-tat attacks, we're sitting in a fragile pause as of late July.

The current pause came after nearly two weeks of escalating U.S. and Iranian strikes that damaged energy infrastructure across the region, as well as most Western military bases in the region. Oil prices had spiked hard during that flare-up, pushing Brent above $100 per barrel at points last week as shipping disruptions and Red Sea attacks hit.

Once the pause kicked in over the weekend, prices dropped sharply, with Brent down over 20% from last week’s highs, settling near $82 per barrel right now. The market's breathing a sigh of relief, but everyone's watching if this truce actually holds. While I would like to see diplomacy succeed and a lasting peace prevail, my research points in the opposite direction. This mismatch between expectations, prices, and likely future escalation provides an opportunity for investors to buy the current dip in oil.

Trump says that talks are happening, but Iran has stated it is not currently engaged in negotiations with the United States and has rejected or conditioned any further talks. Iranian Foreign Ministry spokesman Esmaeil Baqaei has dismissed claims that Tehran requested talks (calling them inconsistent with Iran’s principles or “not in our DNA”), while noting that mediators may still relay messages. Any future negotiations would require the US to first show “more responsible behavior,” implement prior understandings, and adjust its conduct.

This stance comes amid a fragile, largely collapsed June 17, 2026 memorandum of understanding (MoU)/ceasefire framework (brokered with mediation involving Pakistan and others). That deal aimed at a temporary halt to hostilities and a 60-day window for broader talks (including nuclear issues), alongside issues like the Strait of Hormuz and sanctions/oil exports. Both sides have accused each other of repeated violations, but Israel immediately broke the ceasefire condition of stopping attacks on Lebanon and continued bombing, drawing a rare rebuke from Trump.

Vice President JD Vance also publicly stated that President Trump directed the use of the temporary memorandum of understanding (MOU)/ceasefire to refill oil reserves and allow energy prices to drop before major damage was done to the economy. In comments around late June/early July 2026 (including on The Michael Knowles Show), Vance said:

“I think what the president has told us to do is use this MOU to sort of refill the world’s oil economy, to refill some stocks, and then to see where the hand is.”

Analysts have also suggested that the June 2026 ceasefire/MoU was partly motivated by the need to restock US weapons or munitions. Reports and analysis noted that prolonged fighting had depleted certain US munitions stockpiles (e.g., interceptors, precision missiles), with internal concerns raised by military leaders. Some earlier ceasefire periods (such as in April 2026) were described in reporting as opportunities for the US to re-arm/restock.

Given these revelations, my hope for an honest and lasting ceasefire has diminished. Iran likely shares this understanding, which is why it has refused further negotiations. Not to mention that some Iranian officials involved in negotiations or diplomatic contacts with the United States were targeted and killed by the IDF earlier in 2026 during the negotiation process.

In this context, Iran’s reluctance to return to the negotiation table is understandable. When coupled with Trump’s ego and Israel’s insistence that the United States fight this war on their behalf, this suggests that any current talks that might be taking place are unlikely to result in a lasting peace deal.

Complicating peace efforts further, Israeli PM Netanyahu just arrived in Washington, with many believing he is there to keep the pressure on the US government to continue attacking Iran. In response, Iran is warning it'll widen the conflict if strikes resume.

My view is that Israeli leaders are not going to be happy until there is regime change in Iran and pro-Israeli leadership is installed. Israeli leadership has long viewed a weakened or changed Iranian regime as a strategic priority. Continued pressure from Jerusalem makes a durable ceasefire more difficult.

But this is no easy task and will involve a much larger sacrifice in US soldiers and treasure for a war that is widely unpopular with the American public. Yet, Trump has largely ignored this inconvenient fact and, despite repeatedly promising no new wars on the campaign trail, continues to fight a war that many argue is not in the interest of the United States.

This gets a bit more political than normal for me, but the background is necessary to understand my investment thesis that escalation is the most likely outcome and that higher oil prices are not transient. Perhaps the upcoming mid-term elections can be viewed as one positive for the peace process, given the unpopularity of the war. But any ceasefire to satiate the American public is likely to be short-lived political theater.

The real story for energy markets is supply disruption on two critical chokepoints. The Strait of Hormuz normally carries about 20% of global oil trade. Iran has near-total control and has repeatedly been able to close it; shipping traffic has cratered, and any real resumption of hostilities could choke it off completely.

Meanwhile, the Houthis have opened a second front. In the past few days they've hit Saudi Aramco facilities on the Red Sea coast, including a major refinery in Jizan that processes four hundred thousand barrels per day. They also targeted Yanbu, Saudi Arabia's key Red Sea export terminal that serves as a bypass route when Hormuz is blocked. And a complete closure of the Bab el-Mandeb Strait by the Houthis blocks another 5% of global oil trade.

These aren't minor incidents — fires were visible, oil prices spiked above $100 a barrel again, and it shows how quickly the conflict can spread to Saudi infrastructure.

But the part of the story that energy speculators seem to be missing or downplaying is the fact that the damage to energy infrastructure can take several months optimistically and a few years realistically to repair. Even if the Straits in the image above are reopened, oil production is likely to be diminished for a long time into the future.

On top of that, the United States has almost no cushion left in its Strategic Petroleum Reserve. The SPR has been drawn down aggressively to try to keep prices in check since the war started. It's now sitting around 311 million barrels — the lowest level since 1983! We've burned through nearly a hundred million barrels just this year. That buffer that helped blunt price spikes in past crises is basically gone, so any new supply shock will hit consumers and markets much harder.

Analysts are already pricing in serious upside. Goldman Sachs sees Brent testing $120 a barrel by October if the disruptions drag on. Others warn a full regional flare-up could push it past $150—levels that would shatter previous records. We're already seeing the effects at the pump: gasoline above four dollars, diesel over five twenty in many places.

The market keeps betting on quick resolutions and ceasefires that haven't held. Every time there's a headline about talks, prices pull back. But the fundamentals are stacked against a fast return to normal. Two major shipping routes are under threat, Saudi refining and export capacity are getting hit, Iranian proxies are active across the region, and the world's largest emergency oil stockpile is running on fumes.

For investors, this creates a compelling setup in energy. Oil producers, particularly those outside the immediate conflict zone, stand to benefit from sustained higher prices. Refiners with strong margins, oil service companies, and midstream infrastructure plays could all see tailwinds. Even if you don't want direct commodity exposure, energy equities still look attractive relative to the broader market given these supply risks.

Of course, nothing in geopolitics is guaranteed. A genuine, lasting deal could ease tensions and send prices lower. This would be my preferred outcome, and I would be happy to take some short-term losses to see a cessation of hostilities. But right now the path of least resistance looks like continued friction, sporadic attacks, and tight supply. The SPR can't ride to the rescue as it has before, and the Houthis have shown they can disrupt Saudi oil flows even on the Red Sea side.

This isn't about rooting for conflict — it's about reading the board clearly. The bullish case for oil isn't built on hope; it's built on constrained supply, exhausted buffers, and two active chokepoints that are hard to replace. When those realities collide with stubborn optimism in the futures market, the adjustment can be sharp and profitable for those positioned ahead of it.

Stay sharp out there, Hive. Energy markets reward those who see the risks before the headlines force everyone else to catch up.

If you agree with my thesis that energy prices are headed higher and likely to remain elevated longer than most anticipate, the current dip could be an excellent buying opportunity to position ahead of any coming escalation and supply disruptions.

Here are some ways that investors can gain exposure to rising energy prices:

During the first major oil spike earlier this year, the strongest performers were direct oil ETFs (USO), tanker shipping (BWET), oil-services (OIH), and pure E&P funds (XOP). I suspect the same will be true during the next round of higher energy prices.

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Cheers,

 Jason Hamlin, Founder, Nicoya Research