Brent crude climbs above $100 as Middle East tensions fuel supply fears

Crude oil prices extended their strong upward momentum this week, with gains accelerating sharply on July 23 as escalating geopolitical tensions in the Middle East intensified concerns over global supply disruptions. After rising steadily in recent sessions, both Brent and WTI posted their biggest single-day gains in months, reflecting growing fears that the ongoing conflict could significantly impact global crude flows.

Brent closes above $100 for the first time in two months

Brent crude futures jumped $6.62, or 7%, to settle at $100.69/bbl, marking the first close above the $100/bbl level since May and the highest settlement in two months. US WTI crude also surged, gaining $5.36, or 6.2%, to finish at $92.19/bbl, its strongest closing level since early June.

The latest rally has pushed Brent prices nearly 40% higher than levels seen before the Iran conflict began in February, with a significant portion of those gains occurring during the current month.

Despite the sharp rise, prices eased slightly during early Friday trading. Brent slipped to $100.28/bbl, while WTI edged down to $91.74/bbl, as traders paused after the recent rally.

Growing supply risks drive the market higher

The latest price surge was largely driven by rising concerns over crude supply after reports that Yemen's Houthi forces attacked two Saudi oil tankers in the Red Sea, adding fresh uncertainty to an already volatile region. The incident came as shipping through the Strait of Hormuz had already slowed due to heightened military tensions and attacks linked to the ongoing Iran conflict.

Together, the Strait of Hormuz and the Bab el-Mandeb Strait account for roughly a quarter of global oil shipments. Any prolonged disruption across these strategic waterways could significantly tighten global crude supplies.

Supply concerns were further reinforced by reports of declining Iranian oil exports, reduced Gulf crude loadings, and lower tanker traffic through the Strait of Hormuz. Although some Saudi cargoes continue to move through the Bab el-Mandeb Strait, reduced export volumes and increasing shipping risks have strengthened expectations of tighter oil availability in the near term.

Markets remain focused on geopolitical developments

Growing uncertainty in the Middle East has further strengthened bullish market expectations. Goldman Sachs has projected that Brent crude could rise above $120/bbl during the fourth quarter if disruptions in the Strait of Hormuz continue through 2027, with prices potentially moving even higher if disruptions also affect the Bab el-Mandeb Strait and the Suez Canal.

Meanwhile, US President Donald Trump warned of a "major military punishment" against Iran and its Houthi allies, raising concerns that the conflict could broaden further.

Attention is now shifting toward the upcoming OPEC+ meeting on August 2, where producers are expected to approve another production increase of around 188,000 barrels per day for September in an effort to ease tightening supplies. However, with military tensions continuing to disrupt production and shipping routes across the Middle East, geopolitical developments are expected to remain the primary driver of crude oil prices, keeping market volatility elevated in the coming weeks.

Stay ahead of market trends with the Credco app. For any queries, please reach out via WhatsApp at +91 8448083211.