Key market data and developments

1. As of the August 25 close, light crude oil futures for October delivery on the New York Mercantile Exchange fell $2.05 to settle at $85.01 per barrel, a decline of 2.35%. Meanwhile, London Brent crude futures for October delivery dropped $2.22 to close at $92.17 per barrel, also down 2.35%. By the 2:30 AM close on August 25, the main SC crude oil contract had slipped 0.98% to 588 yuan per barrel. (Source: Bloomberg)

2. The Iranian rial has tumbled to a record low, with one US dollar now exchanging for 2.03 million rials. This comes after Washington signaled it would impose unprecedented economic pressure on Iran. According to the currency tracking website Bonbast, the rial hit 2.039 million against the dollar on the unofficial market on Monday. The currency remains under persistent pressure as the United States seeks to further isolate Iran. Washington is attempting to cut off Iran's economic lifelines by threatening the country's few remaining trading partners, blockading its key Persian Gulf ports, and curbing its oil exports. Iran's leading financial newspaper, the World Economic Journal, attributed the rial's depreciation to multiple factors, including disrupted foreign exchange transfers, declining exports, rising import demand, and heightened inflation expectations. (Source: Bloomberg)

3. US President Donald Trump has criticized Canadian leadership, declaring that the US will "no longer allow Canada to take advantage of America." In a post on his social media platform Truth Social, Trump took aim at Ontario Premier Doug Ford, dismissing his remarks as "bluster" and accusing Canada of relying on US support for decades. Trump stated that the US will "always be larger, richer, and more powerful than Canada," adding that Canada could not survive without the US. He claimed Canada depends heavily on American funds and blamed Prime Minister Mark Carney and Ford's leadership for driving Canadian businesses overseas. Trump also noted that Canada relies on the US to transport much of its electricity, oil, and natural gas, warning that Canada will face more severe consequences if it does not "play by the rules." He further pointed out that Canada's unemployment rate has climbed to 10% and continues to rise, with companies fleeing to the US, and asserted that "the days of hurting American farmers and businesses are over." (Source: Bloomberg)

4. The United Nations has established a task force to address the Strait of Hormuz crisis. UN Secretary-General António Guterres told a press conference that ongoing conflicts in the Middle East and the Russia-Ukraine war are severely impacting global trade, energy, and food supplies by disrupting maritime shipping. Blocked shipping routes through the Strait of Hormuz, the Red Sea, and the Black Sea are restricting the transport of critical goods such as oil, fertilizers, and grain, driving up oil prices, container shipping rates, and fertilizer costs, and further exacerbating global hunger and the hardships faced by vulnerable populations. Guterres outlined that the UN has formed a working group to tackle the Hormuz crisis, planning to establish a UN-coordinated mechanism for registration, verification, monitoring, and de-escalation, with an initial focus on ensuring the transport of fertilizers and related raw materials. The Secretary-General emphasized that this mechanism would not alter any nation's sovereign rights nor replace the political efforts needed to restore freedom of navigation and resolve conflicts, but it could serve as a pragmatic first step toward reducing risks, securing essential supplies, and rebuilding trust. (Source: Bloomberg)

5. Oil flows through the Strait of Hormuz have become a point of contention, with US government data clashing with market tracking figures. According to the Wall Street Journal, the Trump administration claims significant volumes of oil are transiting the Strait of Hormuz, but commercial tracking agencies that monitor global oil shipments report actual flows far below those assertions. US Energy Secretary Chris Wright stated last week that the US military assisted in moving more than 15 million barrels of crude oil and petroleum products through the waterway on Tuesday. He claimed that average oil exports through the Strait of Hormuz exceeded 8 million barrels per day over the past seven days. Earlier this month, Wright had cited a seven-day average of about 9 million barrels per day. However, commercial vessel tracking firms present a starkly different picture, estimating flows at roughly 2 million to 6 million barrels per day. Data on cargoes loaded in the Persian Gulf region and destined for buyers also fails to corroborate the US claims. (Source: Bloomberg)

Investment outlook

The intensifying US economic sanctions against Iran are taking a heavy toll, despite Tehran's tough external posture. Iran's economy is already suffering severe damage: oil exports are effectively blocked by US military pressure, the rial has plunged to record lows, and multiple natural gas processing facilities have been struck, raising the prospect of a serious gas shortage this winter. As time goes on, Iran's position is likely to weaken further, which increases the possibility of Tehran eventually conceding at the negotiating table. However, there remains no clear timeline for the reopening of the strait.

Strategy

Geopolitical risk premiums are currently driving oil price volatility. Fundamentals show no significant supply-demand gap, and the market is being led by sentiment in the near term, warranting caution against reversal risks.

Downside risks: de-escalation of Middle East hostilities, resumption of strait navigation, and a global economic crisis.

Upside risks: a stronger-than-expected recovery in Chinese demand and further deterioration of the Red Sea situation.

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