Hedge Funds Raise Brent Longs as Hormuz Tensions Mount

Hedge funds increased net-long positions in Brent crude to 261,435 contracts in the week through Sept. 1, the highest level since May, according to ICE Futures Europe data on futures and options. Money managers added 37,837 contracts over the week.

Commodity Futures Trading Commission figures show hedge funds also raised net-long positions in US crude to their strongest level since June.

The increase in bullish positioning followed renewed US military strikes and Iranian retaliation. Those exchanges have complicated efforts to restore normal shipping through the Strait of Hormuz and prompted renewed threats to vessels using the waterway.

Tanker traffic had been recovering before the recent escalation; the new clashes interrupted that recovery and raised concerns that shipping restrictions could persist.

Hedge funds also increased net-bullish bets in diesel to the highest level since March. US retail diesel prices reached a record $5.85 a gallon on Thursday.

Market participants are monitoring tanker traffic volumes, the level of naval protection in the Gulf and any further military activity to assess short-term supply risk.