Brent crude breached the $100-per-barrel mark on Wednesday, marking a return to levels last seen in late July. The move reflects heightened concerns over renewed fighting in the Middle East and the prospect of further interruptions to oil shipments. Yet the rise in prices has been relatively gradual, not the abrupt spike markets sometimes register with geopolitical flare-ups.
Industry figures point to mixed signals that have kept the rally in check even as supply risks have grown. Russell Hardy, chief executive of Vitol, told attendees at the APPEC conference in Singapore that roughly 9 million barrels per day (bpd) of crude and around 1 million bpd of refined products had been exported from the Middle East in recent days. By contrast, before the Iran war began on February 28, exports of crude and products together were about 20 million bpd.
Flows through Hormuz and alternative shipping patterns
One immediate factor limiting an even larger price surge has been the volume able to transit the Strait of Hormuz in recent weeks. Rystad Energy chief economist Claudio Galimberti said that in the week before fighting resumed on August 30, roughly 8 million to 9 million bpd were moving through Hormuz - about double the previous week’s volume. During an interim U.S.-Iran peace deal in July, Hormuz crude exports even reached pre-war levels of 16 million bpd.
Still, experts note that shipments have fallen considerably since the late-August escalation. To compensate, Gulf producers have shifted cargoes to alternative routes and increasingly used ship-to-ship transfers outside Hormuz, which has mitigated some of the earlier shortfall. Saudi Aramco resumed loadings from Ras Tanura inside the Gulf in August, although Red Sea exports from its Yanbu terminal have been constrained by a naval blockade imposed by the Iran-aligned Yemeni Houthis.
Provisional Kpler data show how export patterns adjusted in August. Yanbu exports fell to 1.429 million bpd in August, down from an average of 3.9 million bpd over the prior three months. By contrast, shipments from the alternate Egyptian export point at Sidi Kerir rose to 2.139 million bpd in August, more than double June volumes. Iraq, the second-largest OPEC producer, saw exports rebound to about 2.34 million bpd in August. United Arab Emirates shipments held 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. At the same time, Iran’s exports have fallen sharply because of the U.S. blockade.
Production response outside OPEC and Russian flows
Another restraint on prices has been increased output from non-OPEC producers. The United States, Canada and Guyana are collectively expected to raise output by about 1.4 million bpd this year, according to Jarand Rystad, founder of Rystad Energy. That incremental supply helps to fill a portion of the Middle East shortfall.
Russian exports remained steady at about 5.5 million bpd in July and August, down from a June peak of 6.4 million bpd but still about 23% higher than in February. Kpler data attribute part of this dynamic to lower processing at Russian refineries due to damage inflicted on plants by Ukrainian attacks. Separately, Russia has cut its 2026 oil output forecast to what it calls a 17-year low, a development that could weigh on future export capacity.
Demand destruction and structural shifts in consumption
On the demand side, a significant volume of consumption has been lost. Rystad estimates demand destruction in petrochemical and transportation fuel segments remains notable - about 3.5 million bpd in the third quarter, versus around 4.5 million bpd in the second quarter. China accounts for more than half of the reduction, reflecting rising transport electrification and coal-based chemicals.
Top importer China cut seaborne crude shipments to roughly 7 million bpd in July and August, down from more than 11 million bpd in February. Sinopec’s research arm projects Chinese oil demand will decline by 600,000 bpd in 2026, or 8.9%, marking a third consecutive annual fall. Market participants also point to China’s sizable reserves - estimated by Kpler at about 1.17 billion barrels - as providing additional market comfort and limiting the urgency of price jumps.
Physical market tightness and the diesel squeeze
Despite moderation from alternate flows and incremental non-OPEC production, physical and product markets display acute tightness in certain pockets. Spot premiums have climbed back to April levels, with Dubai and Oman prices more than $20 a barrel above Dubai quotes for cargoes loading in November, according to Reuters-sourced data. Oman futures reached $121.68 on Wednesday.
David Fyfe, chief economist at Argus, emphasized the divergence between headline price movements and what physical markets are signaling. "At the moment, it’s telling us that physically things are incredibly tight," he said. Fyfe highlighted the diesel market in particular, calling it a "screaming shortage." Fuel markets have tightened as refiners ramp up diesel output, and the recent U.S.-Iran escalation is expected to curb Gulf exports while demand for diesel rises. The U.S. diesel market has hit record-high pricing.
Analysts revise their outlooks
The accumulation of geopolitical risk and evidence of physical tightness has prompted several banks to lift their price forecasts. Morgan Stanley now expects Brent to average $100 a barrel in the fourth quarter. HSBC raised its 2026 and 2027 Brent price projections to $90 and $85 a barrel, respectively. Goldman Sachs increased December 2026 and 2027 forecasts for both Brent and West Texas Intermediate by $5 a barrel, citing expectations that Middle East shipping disruptions could persist into next year; it now projects Brent at $85 and WTI at $80 for December 2026, and $80 and $75 for Brent and WTI in 2027.
Implications for markets and participants
The current price environment reflects a balance between mounting supply risks and mitigating forces. Alternate shipping routes and ship-to-ship transfers, increased output from non-OPEC producers, resilient Russian exports relative to February levels, and meaningful demand destruction - especially in China - have collectively kept the rally from being more pronounced. At the same time, tightness in physical cargoes and the diesel market has been sufficient to push spot premiums and some futures contracts sharply higher, encouraging analysts to raise forecasts for the months ahead.
Decision-makers across the energy value chain - from refiners and shipping operators to traders and industrial consumers of diesel and petrochemicals - face a market that is simultaneously constrained and partially insulated. Observed flows, production adjustments and demand shifts will continue to determine whether $100 becomes a floor, a temporary peak, or the beginning of a sustained higher-price regime.