Oil Nears Pre-Conflict Levels as Traders Watch Hormuz and Gulf Gas Risks

Oil futures steadied near pre-conflict levels on July 2 as traders weighed a partial recovery in shipping through the Strait of Hormuz against lingering risks to Gulf energy flows and U.S.-Iran diplomacy.

WSJ Market Talk said West Texas Intermediate settled at $68.69 a barrel and Brent at $71.80, describing crude as stabilizing after the latest spike in geopolitical risk. The tone across the energy market was not one of panic, but of caution: prices had eased, yet the underlying supply and shipping questions were still unresolved.

Oil settles, but risk premium remains

A separate WSJ oil report said crude had returned to pre-conflict levels as supply concerns eased. MarketWatch gave a similar read, saying Brent was around $70.83 and WTI around $67.69, while noting that shipping remained disrupted and tanker traffic through Hormuz was still below prewar levels.

That leaves the market in a middle position. Traders are no longer pricing oil as if a full regional supply shock is imminent, but they are also not acting as though the threat has disappeared.

Citi added to the bearish side of the debate. According to WSJ, the bank expects Brent to reach $60 to $65 a barrel by year-end and has recommended selling summer rallies. The call reflects a view that recent strength may fade if the current de-escalation holds.

Hormuz traffic improves, but the politics do not

A WSJ live update said daily vessel traffic through the Strait of Hormuz had stabilized at 30 to 60 crossings per day over the prior week, averaging about 40 vessels per day so far that week. That is a partial recovery for one of the world’s most important energy chokepoints, where any disruption can quickly affect crude, product and LNG flows.

But the political question around the strait remains unsettled. The same report said Iran claims control over passage management, while U.S. forces say no country has regional authority to control or shut the strait. That dispute matters because markets are not only watching physical traffic, but also whether a cease-fire-like calm can hold.

The July 2 Market Talk update framed the broader picture the same way: oil risk has eased from its most extreme levels, but traders still see the Strait of Hormuz as an unresolved variable rather than a settled route.

European gas reacts to Gulf LNG concern

The tension is also showing up in gas markets. A July 2 WSJ gas report said Dutch TTF natural gas prices rose 2.4% to €44.04 per megawatt hour.

The report linked the move to low regional storage, which it put at 49% capacity, and to uncertainty over LNG supplies from the Persian Gulf. It also said QatarEnergy had extended force majeure on some shipments, reinforcing the market’s concern that Gulf supply disruptions can spread beyond crude into Europe’s gas balance.

For European buyers, the issue is not just one of price direction. The combination of limited storage and uncertain LNG cargoes makes the market vulnerable to any additional setback in Gulf supply, especially if shipping conditions worsen again.

The analyst view is still cautious

The latest market calls show that investors and analysts are treating the recent calm as conditional. Citi’s year-end Brent target of $60 to $65 suggests a view that the market can work lower if diplomacy and shipping conditions continue to improve.

That view is consistent with the broader price action cited by WSJ and MarketWatch, where crude has moved back toward pre-conflict levels but not into a fully settled pattern. The residual premium appears tied less to immediate lost barrels than to the possibility of renewed disruption in the Strait of Hormuz or fresh uncertainty over Gulf LNG exports.

In other words, the market is discounting the most severe risk scenario, but not the risk itself.

What traders are watching next

The near-term questions are straightforward. Traders will watch whether Hormuz traffic continues to normalize or slips again after the recent attacks on ships. They will also watch for any new guidance from QatarEnergy or other Gulf suppliers on force majeure or shipment schedules.

Brent and European gas prices will likely stay sensitive to any diplomatic setback involving U.S. and Iranian negotiators. If those talks progress and shipping stays open, the current risk premium could keep fading. If they stall, the market may quickly reprice the same chokepoints it has just begun to treat more calmly.

For now, the message from the market is cautious de-escalation rather than resolution. Oil has moved back toward pre-conflict levels, but Hormuz, Gulf LNG supply and shipping insurance conditions remain live risks for energy markets in Europe, the Middle East and beyond.