Oil Prices Surpass $100 Again... Concerns Over Prolonged Energy Shock

Trump Delays End of War to "After the Midterm Elections"
Escalating US-Iran Conflict Dampens Hopes for Resolution
Oil Price Outlook Raised on Prospect of Prolonged Tensions

As military conflict between the United States and Iran has flared up again, international oil prices have surged by more than 3%, surpassing the $100-per-barrel mark once more. In addition, even U.S. President Donald Trump has taken a step back, delaying the anticipated end of the conflict to after the November midterm elections. This has heightened concerns that the Middle East-driven energy shock may continue for an extended period.

On the 9th (local time), the price per gallon of regular unleaded gasoline is displayed on the outdoor electronic billboard of a Conoco gas station in Denver, Colorado, USA. Photo by AP.

On the 9th (local time), at the London ICE Futures Exchange, Brent crude oil futures for November delivery, the benchmark for international oil prices, closed up 3.4% from the previous session at $101.21 per barrel. The October contract for West Texas Intermediate (WTI) also finished up 3.2% at $96.05 per barrel. Both contracts recorded their highest closing prices since May 22.

After soaring to a wartime high of $126 per barrel at the end of April, oil prices had dropped to the $70 range when the United States and Iran reached a memorandum of understanding (MOU) in June that included extending the ceasefire and gradually reopening the Strait of Hormuz. However, as the agreement collapsed and both sides resumed retaliatory attacks, oil prices have once again exceeded $100 per barrel as of July 24—about a month and a half since the price slide.

On the 10th (local time), reports emerged of renewed explosions in southern Iran and around the Strait of Hormuz. According to Iran's semi-official Fars News Agency, multiple explosions were heard that morning in the Sirik and Minab areas in southern Iran, as well as on Qeshm Island in the Strait of Hormuz.

The U.S. Central Command (CENTCOM) announced on the 8th that it had destroyed five Iranian oil tankers in response to an Iranian Islamic Revolutionary Guard Corps (IRGC) attack on a U.S. naval vessel. In retaliation, Iran claimed it attacked a U.S. military base in Jordan with ballistic missiles. Meanwhile, Houthi rebels are intensifying attacks on Saudi Arabian energy infrastructure. As a result, not only the Strait of Hormuz but also Saudi oil shipping routes are under threat.

Even the Trump administration, which had been confident of an early end to the conflict, has backed down. Before departing for Dallas, Texas, President Trump told reporters that the war would end “as soon as the election is over,” and that “right after the election, oil prices will drop sharply.” Regarding the timing of the price decline, he commented, “I think it will take a little longer than the midterm elections.” Notably, this is the first time President Trump—who previously stated the war would end “very soon”—has postponed the expected timing until after the November midterm elections.

The prices per gallon for three types of gasoline are displayed on the pump at a Conoco gas station in Denver, Colorado, USA. Photo by AP Yonhap News

The market has focused less on the fact that the international oil price has surpassed $100 per barrel again, and more on the possibility that high oil prices could become structurally prolonged. The Financial Times (FT) analyzed that, alongside sustained disruptions to oil shipments through the Strait of Hormuz, global inventories of oil and petroleum products have also fallen—making the market more vulnerable to additional supply shocks now than at the outset of the conflict.

Jorge Leon, Head of Geopolitical Analysis at Rystad Energy, stated that the recent escalation of hostilities has led to a “significant decrease” in traffic through the Strait of Hormuz. The daily oil flow, which was about 8 million barrels per day during the last week of August, has dropped to about 1 million barrels per day this week. He also stated, “We are back at $100, but this time the situation is more severe,” highlighting shrinking buffers and reduced inventories of crude oil, petroleum products, and diesel as major issues.

With countries running down their strategic oil reserves, their ability to absorb further supply shocks has also diminished. FT pointed out that escalating tensions in the Middle East are coinciding with declines in both strategic reserves and commercial inventories, presenting a significant problem.

Global investment banks (IBs) are also raising their oil price forecasts this week in response to the prospect of a prolonged Middle East conflict. HSBC, in a report on the 8th, assessed that the market is adapting to a “new normal” in which the Strait of Hormuz is neither fully closed nor fully open, but is persistently operating at reduced capacity. HSBC projected the fourth-quarter Brent crude price at $95 per barrel. The bank also raised its 2027 forecast by $20 to $85 per barrel, and increased its long-term forecast for 2028 and beyond to $75 per barrel.

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