Brent briefly climbed above $100 per barrel on Thursday as US‑Iran hostilities and new Houthi attacks on Red Sea shipping reignited fears of long‑term supply disruptions.
The new violence heightened worries about the security of two critical chokepoints – the Strait of Hormuz and the Bab el‑Mandeb – pushing crude prices to their highest levels in months.
Choice Institutional Equities issued a report on July 23 stating that a full stoppage of traffic through these straits could cut off roughly 18 million barrels per day of crude and 5 million barrels per day of petroleum products.
Even after accounting for extra supply from other producers, the report estimated a net physical shortfall of 11 to 13 million barrels per day.
The US Strategic Petroleum Reserve has been drawn down to historically low levels, limiting the country’s ability to absorb another shock.
With supply risk rising, the market has moved into backwardation, meaning near‑term contracts trade at a premium to later ones, a sign that traders expect tighter supplies soon.
The sharp rally has revived predictions that Brent could reach $120 a barrel if geopolitical tensions stay high.
Goldman Sachs noted that Brent might climb above $120 by year‑end if the Middle East conflict continues and the Strait of Hormuz remains blocked, but its base case assumes a gradual easing of tensions.
Eric Nuttall of Ninepoint Partners warned that the market cannot afford a further loss of 2.6 million barrels per day of Iranian output, as inventories sit near seasonal lows and the strategic reserve is depleted.
Kevin Book of ClearView Energy Partners said an Iranian shutdown would add at least $5 to crude prices, while Bob McNally of Rapidan Energy Group warned that a full stop of Iranian production would cripple the country’s refining and halt transportation once inventories run out.
Tobin Marcus of Wolfe Research cautioned that investors may underestimate the risk of disruptions around the Bab el‑Mandeb, where about 4.5 million barrels per day of Saudi crude are vulnerable to Houthi attacks.
Bhavik Patel of Tradebulls Securities said the short‑term outlook remains bullish because alternative routes are now blocked, and attacks on Russian shipping in the Black Sea add to market worries.
Patel also noted that backwardation reflects expectations of a near‑term shortage, with buyers paying more for immediate delivery, and that the market is not about “if” but “when” Brent will touch $120.
From a technical view, Aamir Makda of Choice Broking said the recent rally has formed a rounding‑bottom pattern, often a signal of a shift from decline to uptrend, and that the next key level to watch is around $105.
If Brent breaks above $105 and sustains the move, it could attract fresh buying and push prices toward $115 in the coming week, according to Makda.