The brief window of optimism that followed the US-Iran ceasefire is closing fast. Oil shipments through the Strait of Hormuz, which had recovered to roughly 50% of pre-war levels under the June 17 memorandum of understanding, have fallen sharply over the past week as the ceasefire arrangement fell apart and active fighting resumed between US and Iranian military forces. According to Goldman Sachs, flows through the strait have dropped back to an estimated 3 to 5 million barrels per day, down from approximately 10 million barrels per day in early July.
The reversal leaves the global oil market short roughly 13.4 million barrels per day of Gulf supply, a deficit that is already showing up at the pump and in the price of crude. Brent crude has jumped more than 8% over the past five trading sessions to trade back above $84 per barrel. WTI has climbed more than 8% to above $79. Both benchmarks are moving in the wrong direction for an economy that had only just begun pricing in a post-war energy recovery.
What Went Wrong
The MOU signed June 17 was supposed to reopen the strait to pre-war commercial traffic within 30 days and establish a framework for broader negotiations. For roughly four weeks, that framework held. Tanker crossings increased, oil prices declined sharply, and the global economy began adjusting to a lower energy cost environment. Gas prices fell below $4 nationally for the first time in months.
That progress has now reversed. US Central Command announced a new wave of strikes against Iranian military targets Wednesday, the fifth consecutive day of US military action in the region. Iran has continued retaliating with attacks against US installations throughout the Gulf. A second US naval blockade of the strait, which began Tuesday evening, has already redirected commercial vessels attempting to transit the waterway. Energy market analysts at Rystad Energy have stated that expectations for near-term flow normalization have failed to materialize, and the latest escalation has further reduced the probability of a recovery in the weeks ahead.
The Small Cap Squeeze Returns
For investors in the sub-$2 billion market cap space, this reversal hits on two fronts simultaneously. The consumer-facing small caps that had only just begun to benefit from lower fuel costs are now watching that relief evaporate. Companies in transportation, logistics, food service, and retail, including names like ONE Group Hospitality and Travelzoo, are right back in the margin compression environment that characterized the spring. Diesel prices, which had been trending lower, are poised to reverse alongside crude if the strait remains effectively closed.
On the other side of the trade, domestic energy producers are seeing the price environment strengthen again. Independent oil and gas operators, including names like InPlay Oil and Alliance Resource Partners, along with midstream players like Summit Midstream Partners, benefit directly from sustained crude prices above $80. The economics for US producers improve at every dollar WTI moves higher, and the re-escalation removes the near-term risk that a permanent peace deal would collapse prices back toward pre-war levels.
Goldman Sachs strategists have cautioned that recovery this time could be slower than the initial post-ceasefire rebound, given depleted global inventories and continued shipper reluctance to route through the region even via Omani waters. China, the world’s largest crude importer, had reduced its intake by 5 million barrels per day during the first phase of the conflict, but that restraint could shift as Gulf producers adjust pricing and Beijing reassesses its long-term stockpile strategy.
The ceasefire was supposed to be the beginning of the end. Instead, the strait is closing again, and the energy cost pressure that defined the first half of 2026 is threatening to define the second half as well.