Oil Alert: The Risk of a Major Spike Grows Due to the Crisis in the Middle East

The oil market is once again under pressure due to a new escalation of the conflict in the Middle East. Crude oil surpassed $100 per barrel for the first time since May, and the factors that had so far prevented a larger crisis began to weaken.

Tension is concentrated in the Strait of Hormuz, a key route for global oil trade, but it has already spread to other critical routes and new logistical restrictions. The scenario has opened the risk that crude prices could return to levels close to the highs of 2022 or even set new records if the crisis deepens.

Helima Croft, global strategy director at RBC Capital Markets, stated in comments cited by CNN that the conflict has entered a "more dangerous" phase. The warning points to a change in perception in the market, which had so far found alternatives to sustain the flow of barrels and avoid a stronger price spike.

Hormuz and the Red Sea Pressure the Oil Market

The main change is observed in the oil exit routes from the Middle East. During the early months of the war, the market managed to navigate part of the crisis by diverting crude to the Red Sea.

About 20% of the world's oil passes through the Strait of Hormuz.

According to J.P. Morgan, about 7 million barrels per day that would normally have passed through the Persian Gulf were redirected through pipelines to that area. However, those alternative routes have also become exposed.

Capital Economics warned that the Houthi blockade of the Bab al-Mandeb Strait closed another exit point for around 5 million barrels per day of Saudi oil. The problem is not limited to the availability of routes but also to the type of vessels that can use them.

Natasha Kaneva, head of global commodities strategy at J.P. Morgan, noted that the largest fully loaded tankers cannot pass through the Suez Canal due to depth limitations. If smaller vessels are used and they navigate around Africa, the journey can take from four to eight weeks.

Maritime Insurance Adds Another Obstacle for Vessels

Maritime insurance has become another pressure factor for crude trade. So far, vessels leaving Hormuz could obtain coverage by paying high war premiums.

That scheme has begun to change. The Lloyd's Market Association has questioned whether ships leaving the strait can obtain policies if they pay tolls to Iran.

According to the analysis, Tehran plans to reimpose charges of between $1 and $2 per barrel. For insurers, this payment could violate U.S. sanctions and nullify the policy for the vessels.{#p-1784890662732-68754}

Some analysts believe that oil could reach $150 per barrel if the conflict in the Middle East persists.{#p-1784891388969-7891}
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Operational risk increases because Iran claims it can attack ships attempting to leave without paying. In this context, the exit from the strait becomes more complex for shipping companies and crude buyers.{#p-1784890662732-64773}

Russia Increases Pressure on Fuel Supply {#p-1784890662732-17148}

The energy crisis is no longer limited to the Middle East. Ukraine's drone attacks on Russian refineries and on the Caspian Pipeline Consortium terminal in the Black Sea have added another point of tension for the global market.{#p-1784890662732-59062}

The offensive has generated fuel shortages in Russia and led the country to ban diesel exports. According to Andy Lipow, president of Lipow Oil Associates, before this ban, Russia exported 800,000 barrels of diesel daily, equivalent to 12% of global shipments.{#p-1784890662732-98822}

Attacks in the Black Sea have also affected crude supply. The analysis indicates that the Caspian pipeline terminal threatens to withdraw 1.7 million barrels per day from the market at a time when other routes are already facing restrictions due to the crisis in Hormuz.{#p-1784890662732-98613}

Low Inventories and Reduced Response Margin {#p-1784890662732-20825}

The decline in inventories appears as another difference compared to the beginning of the war. According to Dan Pickering, director of investments at Pickering Energy Partners, global crude reserves have decreased by 1.3 billion barrels over the past five months.{#p-1784890662732-55561}

In the United States, the Strategic Petroleum Reserve has fallen by 116 million barrels since spring and is at its lowest level since 1983. The article notes that only 60 million barrels are available before reaching the minimum limit set by Congress.{#p-1784890662732-2126}

U.S. commercial inventories are also approaching operational minimum levels. This point reduces the capacity to respond to new disruptions and limits the margin to offset a further decline in supply.{#p-1784890662732-56285}

During the ceasefire in June, over 200 million barrels managed to exit the Strait of Hormuz. Now, according to Naveen Das, an analyst at Kpler, there are 44 vessels in the area, down from 97 before the Memorandum of Understanding.{#p-1784890662732-68513}

China and Inventory Limits {#p-1784890662732-45370}

Global demand has also played a role in containing prices. In recent months, China has reduced its imports because it had accumulated inventories before the conflict and was able to use those reserves to avoid purchases at higher prices.{#p-1784890662732-36032}

However, this margin is not permanent. Kaneva estimated that China has between three and four months before needing to increase its imports again.{#p-1784890662732-84310}

This deadline adds pressure to the market. If disruptions continue and China demands more crude again, the balance between limited supply and consumption could deteriorate.

Goldman Sachs and RBC See Risk of New Highs

The oil market is now facing a race against time. Demand destruction is still containing some of the pressure on prices, but supply constraints are accumulating.

Daan Struyven, head of oil research at Goldman Sachs, stated that oil could return to the highs of 2022 and exceed $120 per barrel in October if the current scenario persists.

RBC Capital Markets proposed a more extreme scenario. According to Croft, if the conflict escalates into a broader regional war, crude could set a new record above $150 per barrel.

The rise in oil prices has already begun to translate into fuel costs in the United States. According to CNN, gasoline prices remain above $4 per gallon and diesel exceeds $5.20.

The evolution of the conflict in Hormuz, the Red Sea, Russia, and inventories will now determine whether the market can sustain its containment mechanisms or if crude returns to a price zone with a direct impact on inflation, transportation, and global energy costs.