Overview
Brent crude crossed the $100-per-barrel threshold on Wednesday for the first time since late July, reflecting heightened worries over renewed conflict in the Middle East and the potential for further interruptions to shipments. The price rise, however, has unfolded gradually rather than in a sharp spike, as a number of offsetting factors have kept additional upward pressure in check.
Key recent flow data underline both the fragility and adaptability of supply. "Roughly 9 million barrels per day (bpd) of crude and another 1 million bpd of refined products have been exported from the Middle East in recent days," Russell Hardy, CEO of Vitol, said at the APPEC conference in Singapore. By contrast, pre-conflict exports were about 20 million barrels per day before the Iran war began on February 28.
How much oil is still moving through Hormuz?
Shipments through the Strait of Hormuz have varied markedly. In the week before fighting resumed on August 30, about 8 million to 9 million bpd were flowing through Hormuz - roughly double the volume from the previous week, according to Claudio Galimberti, chief economist at Rystad Energy. That said, experts note shipments have since fallen significantly.
During a temporary U.S.-Iran peace arrangement in July, crude exports via Hormuz reached pre-war levels of 16 million bpd, demonstrating how rapidly flows can rebound when security conditions ease. Still, the recent deterioration in security has reduced throughput from that level.
Alternate routes and rerouted cargoes
Gulf producers have increasingly relied on alternative channels to keep oil moving. Ship-to-ship transfers outside Hormuz and loadings from different ports have mitigated some of the earlier shortfall from the Gulf.
Saudi Aramco restarted loadings from Ras Tanura in August, while exports from Yanbu in the Red Sea have been pressured by a naval blockade imposed by the Iran-aligned Yemeni Houthis. Kpler provisional data showed Yanbu exports plunged to a six-month low of 1.429 million bpd in August, down from an average of 3.9 million bpd in the previous three months. Attacks by Houthis on Saudi energy infrastructure this week could further imperil Red Sea shipments.
Other alternative shipments are rising. Egypt's Sidi Kerir port shipped 2.139 million bpd in August, more than double June volumes. Iraq's exports rebounded to about 2.34 million bpd in August. The United Arab Emirates maintained shipments around 2.9 million bpd in July and August after a June record. Kuwaiti crude exports recovered to roughly 1 million bpd in July and August.
Iran's exports, conversely, have fallen sharply as a result of the U.S. blockade.
Non-OPEC supply additions and Russian flows
Outside OPEC, increased output is helping to fill part of the gap. Jarand Rystad, founder of Rystad Energy, estimates the United States, Canada and Guyana will collectively raise production by about 1.4 million bpd this year.
Russian crude exports were roughly steady at 5.5 million bpd in July and August, down from a 6.4 million bpd peak in June but still 23% higher than in February, Kpler data showed. That apparent resilience comes even as processing at some Russian refineries has fallen because of damage to plants from Ukrainian attacks. Separately, Russia has downgraded its 2026 oil output forecast to a 17-year low, which may put future downward pressure on exports.
Demand destruction remains material
Weakness in demand is a major counterweight to the supply-side risks. Rystad reports demand destruction of about 3.5 million bpd in the third quarter, compared with 4.5 million bpd in the second quarter. A large portion of this reduction is concentrated in petrochemicals and transportation fuels, with China accounting for more than half, according to Rystad, driven in part by rising electrification in transport and increased use of coal-based chemicals.
China, described in industry commentary as the "new demand OPEC" for the size of its swing influence, reduced seaborne crude imports to 7 million bpd in July and August from more than 11 million bpd in February. Sinopec's research unit projects China's oil demand will fall by 600,000 bpd in 2026 - an 8.9% drop and a third consecutive annual decline. In addition, Kpler estimates China's strategic reserves at about 1.17 billion barrels, a stockpile that has reassured markets.
Physical markets show strains, particularly for diesel
Despite the moderating supply and demand picture, physical and product markets point to local tightness. Spot premiums have climbed back to levels seen in April, with Dubai and Oman cargoes for November loading trading at more than $20 a barrel above Dubai quotes, Reuters data showed. Oman futures reached $121.68 on Wednesday.
David Fyfe, chief economist at Argus, summarized the disconnect: "At the moment, it’s telling us that physically things are incredibly tight. We’ve already got prices substantially above $100 a barrel and even more important, you’ve got a diesel market that is screaming shortage." The U.S.-Iran escalation is expected to curb Gulf exports even as refining runs rise and demand for diesel increases, pushing diesel prices to record highs in the United States.
Analysts revise forecasts upward
In response to evolving risks, several banks have nudged up their Brent outlooks. Morgan Stanley now projects Brent will average $100 a barrel in the fourth quarter. HSBC on Tuesday raised its Brent forecasts for 2026 and 2027 to $90 and $85 a barrel, respectively. Goldman Sachs increased its Brent and West Texas Intermediate forecasts by $5 a barrel for December 2026 and for 2027, now projecting Brent at $85 and WTI at $80 for December 2026, and 2027 prices at $80 and $75 a barrel, respectively. Goldman cited an expectation that Middle East shipping disruptions could continue into next year.
Market implications
The composite picture is one of competing forces: security concerns and product tightness push prices higher, while alternate shipping routes, increased non-OPEC supply and substantial demand destruction restrain a more dramatic surge. The diesel market's acute tightness and the physical premiums for near-term cargoes are focal points for refiners, shipping companies and commodity traders, while broader macro and consumer impacts will hinge on how persistent the supply interruptions and demand trends prove to be.