Crude reaches its highest level since July as disruptions through the Strait of Hormuz and Red Sea deepen, raising the risk of another global inflation shock
Brent crude briefly climbed above $100 a barrel on Wednesday for the first time since July as intensifying fighting across the Middle East heightened fears that disruptions to critical oil shipping routes could further tighten global supplies.
The international benchmark rose above the $100 threshold during early European trading and was trading at about $100.60 a barrel around 5:45 a.m. ET. U.S. West Texas Intermediate crude was trading just above $95 a barrel.
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Brent has risen roughly 25% since the beginning of August as hopes for a lasting end to the six-month U.S.-Iran conflict have faded. The latest escalation came after U.S. forces attacked Iranian tankers, following what the U.S. military said was an attempted Iranian ballistic-missile strike on a U.S. Navy warship.
Iran-backed Houthi militants have also intensified attacks in the region, including strikes that set Saudi energy facilities on fire. The attacks have increased concerns over the security of oil shipments through both the Red Sea and the Strait of Hormuz.
Brent had previously surged as high as $126 a barrel in April before retreating as expectations of a ceasefire reduced the immediate supply-risk premium.
The Strait of Hormuz remains the most important pressure point for the global oil market.
Oil flows through the waterway have recently fallen below 2 million barrels per day, according to Rystad Energy estimates, compared with approximately 8 million to 9 million barrels per day in the week before fighting resumed on August 30.
The decline has sent shockwaves through the markets because Hormuz is one of the world’s most important energy chokepoints. Before the war began on February 28, the waterway typically handled about 125 large commercial vessels a day, including oil tankers and liquefied natural gas carriers, accounting for roughly 20% of global daily crude oil and LNG supply.
Preliminary shipping data showed only six commodity vessels passed through the Strait of Hormuz on Tuesday, down from nine the previous day and below the 10-day average of about 12.
The figures may understate actual traffic because vessels can switch off their Automatic Identification System transponders to reduce their visibility. Of the six vessels recorded, five were entering the strait, and one was exiting, according to preliminary data from ship-tracking firm Kpler. The vessels included a Panamax and an intermediate tanker.
The decline in traffic suggests that the conflict is affecting not only physical oil production but also the willingness and ability of shipowners to move cargo through the region.
A U.S. blockade of Iran-related shipping has also halted Iranian crude exports since it was reimposed in mid-July, further tightening the market.
U.S.-Iran Conflict Intensifies
The energy-market shock has been compounded by a broader escalation in military activity. The conflict intensified Tuesday after Tehran-backed Houthis launched strikes on several Saudi Arabian cities. U.S. forces also attacked multiple Iranian oil tankers, while Iran struck a U.S. base in Jordan.
Marine intelligence firm Marisks reported that U.S. forces had rendered five Iran-linked crude tankers inoperable: the M/T Kaviz, Charminar, Horizon 1, Riesco and Derya.
Four of the vessels were reportedly struck in the Gulf of Oman, outside the Strait of Hormuz, while another was hit near Kharg Island, Iran’s most important oil export terminal.
The attacks introduce another layer of risk for the oil market because damage to tankers and export infrastructure could restrict both the movement of existing supplies and Iran’s ability to bring crude to market.
The Red Sea is facing a separate disruption.
Houthi militants have announced a blockade of Saudi-related shipping, while 25 commodity vessels crossed the Bab el-Mandeb strait on Tuesday. Eleven entered, and 14 exited, compared with an average of about 27 vessels over the previous 10 days.
The traffic included two Suezmax tankers, eight Aframax tankers and one very large crude carrier.
Together, the disruptions at Hormuz and Bab el-Mandeb raise the possibility that shipping companies will increasingly avoid major Middle Eastern routes, forcing vessels to take longer and more expensive journeys and increasing freight, insurance and delivery costs.
Oil Shock Threatens Inflation Outlook
The oil rally is becoming an increasingly important economic issue as well as a geopolitical one. Higher crude prices feed into gasoline, transportation, shipping and manufacturing costs, potentially pushing consumer inflation higher. A sustained Brent price at or above $100 could therefore complicate the outlook for central banks that are attempting to balance economic growth against persistent inflation.
The risk is becoming a cause for alarm because the shock is occurring alongside disruptions to shipping routes. Even if global crude production remains sufficient, higher freight and insurance costs can amplify the price impact throughout the supply chain.
The International Energy Agency said last month that global oil supply was expected to fall by about 4.3 million barrels per day this year, or roughly 4%, despite increased production from countries including the United States, Canada and Guyana.
Major investment banks have responded by raising their oil-price forecasts, with Goldman Sachs, Bank of America and HSBC among those taking a more bullish view of crude prices in recent days.
The oil market has some protection from higher production outside the Middle East, but the scale and speed of the disruption remain difficult to assess.
Additional output from the U.S., Canada and Guyana can cushion some losses, but those barrels cannot immediately replace supplies stranded by a shipping blockade or a prolonged closure of a critical maritime chokepoint.
That makes the duration of the disruption more important than the initial price spike.
If traffic through Hormuz remains severely depressed for an extended period, traders could begin pricing a more persistent physical shortage rather than a temporary geopolitical premium. That would increase pressure on refiners, fuel distributors and consumers while raising the risk of broader inflationary effects.
Conversely, a restoration of shipping flows or a credible ceasefire could quickly remove some of the risk premium that has pushed Brent toward $100.
For now, the direction of the oil market is increasingly tied to events on the battlefield and the safety of commercial shipping.
Brent’s brief move above $100 is therefore more than a psychological milestone. Analysts see it as a signal that traders are beginning to price a conflict in which disruptions are spreading across multiple energy corridors at the same time. But the longer those disruptions persist, the greater the risk that an initially regional oil shock becomes a broader global inflation and growth problem.