As mentioned last week, traffic through the Strait of Hormuz has shown signs of improvement, and those signs have continued this week. Yet the recovery has done little to ease pressure in the physical market.

As I have repeatedly argued, Iran's interest lies in controlling oil prices. The goal is higher for longer. That will push U.S. inflation higher and entrench a spiral that becomes harder to break the longer Washington waits. Higher rates will make financing and refinancing increasingly expensive for the U.S. Treasury and the AI sector, weakening the economy and forcing Washington to accept Iran's terms for peace. We made this judgment in the first week of the war. Since then, despite the daily barrage of fake-news headlines, nothing has changed that trajectory.

The barrels are returning, but moving them has become vastly more expensive. VLCC freight from the Middle East to China has surged to around $35 a barrel, versus roughly $3 at the start of the year. The increase alone is several times the toll Iran proposed in peace negotiations: 5%-7% of cargo value, equivalent to roughly 5-7 a barrel at $100 oil.

Some European refiners are already struggling to pass higher crude acquisition costs through to product prices. If they cut runs, crude demand falls while finished-fuel supply tightens further. Recovering crude flows therefore do not resolve the diesel problem. Diesel feeds directly into producer prices and transmits the energy shock through freight, farming and distribution costs into consumer prices. That keeps pressure on CPI and PCE even when crude futures retreat.

$CL1! 91.850000000000 is much weaker than BZ1!104.72, as Trump launched another round of SPR releases last week to curb out-of-control oil prices ahead of the midterms.