Crude Oil Prices Rise 10% This Week but China Enters Fray to Push for End to Iran War. What's Next?

Oil prices pulled back roughly 3% Friday but remained on track for a nearly 10% weekly gain, as reports that Pakistan — backed by China — is pushing for renewed U.S.-Iran talks offered a rare glimmer of de-escalation hope in an otherwise relentlessly grinding conflict.

The Numbers

Brent futures settled at $96.78 a barrel, down $3.91 or 3.88%, having closed above $100 in the previous session for the first time since May. West Texas Intermediate finished at $89.31 a barrel, down $2.88 or 3.12%. For the week, Brent advanced nearly 10% while U.S. crude gained about 8%, as fighting between the U.S. and Iran sharply escalated.

What's Behind the Pullback

The Friday retreat came on reports that Pakistan, with China's backing, is pushing for a new round of U.S.-Iran talks — the kind of headline that's repeatedly moved this market throughout the conflict. Again Capital partner John Kilduff captured the market's psychology bluntly: "There's nothing this market loves more than hope. Nobody wants to get suckered, so any hint this may get settled they will take. Nobody wants to think we're on a one-way course."

Why Prices Spiked in the First Place

Both Brent and WTI rallied earlier in the week as the U.S. and Iran exchanged missile strikes, traffic through the Strait of Hormuz fell to a trickle, and Yemen's Houthis attacked shipping in the Red Sea. Overnight, U.S. Central Command completed its 13th consecutive night of strikes on Iran, targeting military command centers, drone storage facilities, communication networks, coastal surveillance sites, and maritime capabilities, saying the goal was to "further diminish the threat Iran poses to civilian mariners and commercial vessels transiting the Strait of Hormuz." CENTCOM maintains the strait "remains open for transit despite recent attacks," with more than 50,000 U.S. service members currently operating across the Middle East.

The Shipping Picture Is More Mixed Than It Sounds

Despite fears of a total blockade, daily vessel transits through the Strait of Hormuz held steady at three for each of the past three days, according to preliminary Kpler ship-tracking data, with two additional ships entering the Gulf via the strait on Thursday. At the Bab el-Mandeb strait, commodity vessel transits totaled 32 on July 23, up from 26 the day before. UBS analyst Giovanni Staunovo noted that "in the right seas, ships are still moving... so it's not a complete blockade as some might have feared."

Trump's Escalating Rhetoric

President Trump told Axios Thursday he was mulling a "massive attack" on Iran, bigger than anything seen in the war so far, saying Iran has not "received enough pain yet" and that "I am considering a massive attack. Bigger than ever before. I am close to making a decision. We are all set for it." The comments came after Trump vowed to hold Iran responsible for further Houthi attacks in the Red Sea, warning in a Truth Social post that "major military punishment will be inflicted upon Iran and, of course, the Houthis, themselves" if the Yemen-based group struck shipping again.

China's Quiet but Significant Role

China's crude imports plunged 41.3% year-over-year in June to a decade-low 7.12 million barrels per day — the key factor that's kept oil from spiking even higher during the war. Beijing's move to cut crude imports from 11.7 million barrels a day in February to just under 9 million by late May has acted as a crucial pressure valve on global energy markets, effectively removing roughly 4 million barrels per day of demand while supply remained constrained at the strait. China has also started draining its estimated 1.2 to 1.4 billion barrel strategic stockpile, pulling roughly 41 million barrels from reserves in June alone. With oil now hovering near $90-97 a barrel and Gulf producers cutting official selling prices, Goldman Sachs believes China could ramp up buying again as soon as this month — a shift that could remove the demand-side cushion that's helped keep prices from spiking even further.

How High Could Prices Still Go?

Analysts at JPMorgan estimate that each additional month of supply disruption would add around $7 to $8 a barrel to Brent, potentially lifting monthly average prices to around $114 a barrel if disruptions extend to three months. On the other side of the ledger, UBS sees Brent falling to $85 a barrel by year-end if the conflict eventually cools — illustrating just how wide the range of plausible outcomes remains.

What's Next

With Pakistan and China reportedly pushing for renewed talks even as Trump weighs a potentially larger military strike, oil markets are likely to remain highly reactive to headlines in either direction. The key variables to watch: whether the reported diplomatic push produces anything concrete, whether China resumes larger crude purchases now that prices have eased from their peak, and whether Trump follows through on the "massive attack" he described — any of which could send prices sharply higher or lower within days.