Oil has broken back above US$100 — how high could the Middle East conflict push crude?

Oil has broken back above US$100 a barrel as renewed attacks on tankers, Saudi energy facilities and shipping routes deepen concerns over Middle East supply.

Brent crude briefly reached US$100.19 on Wednesday, its highest level since 24 July, while West Texas Intermediate traded above US$94. Brent has now climbed roughly 25% since early August, reversing much of the decline that followed earlier attempts to stabilise the US-Iran conflict. 

The latest escalation is increasingly affecting physical oil flows rather than simply adding a geopolitical premium to prices.

US forces have destroyed Iranian crude tankers, Iran has retaliated against vessels near the Strait of Hormuz, and Iran-aligned Houthi forces have attacked Saudi energy facilities. Several commercial ships in the Gulf and Gulf of Oman were also damaged during overnight military activity.

That leaves the global oil market exposed at both ends of the Arabian Peninsula: Hormuz remains disrupted, while renewed attacks are making Saudi Arabia's alternative Red Sea export routes less secure.

The question now is whether physical supply tightens enough to keep Brent above US$100 — or whether high prices, alternative production and eventual diplomacy begin to cap the rally.

Earlier stages of the conflict were dominated by the possibility that Middle East supply could be disrupted.

That possibility has become a measurable shortage.

The International Energy Agency expects global oil supply to fall by 4.3 million barrels per day in 2026, taking total production to around 102 million barrels per day. It estimates supply will undershoot demand by roughly 1.27 million barrels per day across the year after renewed fighting disrupted Hormuz, Iranian exports, Red Sea shipping and other supply routes. 

Middle East oil loadings briefly recovered towards pre-war levels earlier in the northern summer, but that improvement did not last. The IEA estimated loadings had fallen back to around 12 million barrels per day by late July, while regional production remained 8.3 million barrels per day below pre-war levels.

Australian traders can also follow crude-price movements without purchasing physical oil or managing futures contracts. Oil CFDs allow long positions if supply disruption drives prices higher or short positions if improving flows and diplomacy unwind part of the current premium.

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The Strait of Hormuz remains central because of the volume of oil that normally passes through the narrow waterway between Iran and Oman.

Around one-fifth of global oil and LNG supply ordinarily moves through the strait. The conflict has not closed it completely, but shipping has become less predictable and far more expensive.

War-risk insurance and other transit costs have soared. An Emirates National Oil Company executive said insurance can now account for as much as 6% of a cargo's value, while total transit costs can reach US$10 million to US$20 million per voyage. Some shipowners are unwilling to enter the region at all. The uncertainty is almost as important as the reduction in traffic.

Tankers can switch tracking equipment off, alter routes or delay voyages, making the real volume of crude moving through the Gulf difficult to determine. Refiners therefore have less confidence about when cargoes will arrive and what replacement barrels may cost.

That supports crude even before another producing facility is damaged.

Saudi Arabia has an important advantage over several Gulf producers: it can move some crude west through pipelines and export it from the Red Sea, avoiding Hormuz.

That safety valve becomes considerably less useful if the conflict spreads to Saudi facilities and Red Sea shipping.

Houthi forces attacked installations operated by Saudi Aramco in several locations this week, causing fires and temporary operational disruptions. The attacks followed months of pressure around Red Sea shipping and the Bab el-Mandeb Strait.

This does not mean Saudi exports are about to stop. The kingdom has extensive infrastructure, spare capacity and alternative routes.

But a market that previously assumed Saudi Arabia could help offset disruption elsewhere now has to assign some risk to Saudi supply itself.

That is one reason the return to US$100 looks different from a temporary spike caused by a single military headline.

Several major banks have lifted their oil forecasts as the supply picture has worsened.

The more bullish scenarios generally require Brent to remain above US$100 and potentially move towards US$120 if Gulf production stays materially below normal levels and alternative supply fails to close the gap.

A move of that size would probably require another deterioration in physical supply rather than fighting alone.

The clearest triggers would include:

• sustained damage to Saudi or other Gulf production and export facilities;

• another substantial fall in tanker traffic through Hormuz;

• prolonged disruption to Red Sea routes;

• deeper inventory drawdowns as refiners compete for fewer barrels; and

• insufficient production growth outside the Middle East.

The current deficit makes the market more sensitive to each additional disruption. The IEA estimates inventories have already fallen by around 410 million barrels since the Iran conflict began.

There is therefore less room for another large supply shock than there was at the beginning of the year.

A tighter market does not guarantee an uninterrupted rally.

The biggest constraint is demand.

The IEA has already cut its 2026 oil-demand forecast sharply and now expects global consumption to contract by around 1.6 million barrels per day this year. Higher crude prices and shortages of refined products have hit consumption particularly hard in Asia and the Middle East.

Triple-digit crude prices eventually changes behaviour.

Consumers drive less. Airlines and freight companies face higher fuel bills. Manufacturers become more cautious. Slower economic activity then reduces the amount of oil required.

Production outside the Middle East also matters. The US, Canada and Guyana have continued increasing output, providing replacement barrels that have prevented the regional disruption from becoming an even larger global shortage.

And diplomacy remains capable of reversing prices quickly.

Iran has been under increasing economic pressure from the US blockade and sanctions, while mediators continue exploring ways to restore freer passage through Hormuz. Any credible agreement that improves shipping reliability could remove part of the premium currently embedded in Brent.

The impact is already moving through the wider economy.

Higher crude lifts the cost of petrol, diesel, aviation fuel, shipping and industrial inputs. Those increases can eventually reach consumer prices and keep inflation higher for longer.

Australia is particularly exposed through refined-fuel prices. Higher international crude and diesel prices can increase transport costs for households, mining companies, agriculture and freight operators even though Australia is itself a major energy exporter.

That can also complicate the interest-rate outlook.

A prolonged energy shock gives central banks another source of inflation at a time when several major economies are already struggling to return price growth sustainably to target.

US$100 oil therefore has the potential to affect currencies, equities and rate-sensitive sectors as well as energy markets.

Oil can move sharply in either direction when military action, shipping data or diplomatic negotiations change the supply outlook.

Mitrade provides exposure to crude-price movements through Contracts for Difference (CFDs), without requiring traders to own physical oil or manage futures contracts with expiry dates and rollovers.

A long position can be used when the view is that worsening disruption, lower inventories or further infrastructure damage could lift crude prices. A short position can be used when improving tanker flows, stronger replacement supply or diplomatic progress is expected to reduce the conflict premium.

Pending orders allow entry levels to be set in advance, while stop-loss and take-profit orders can define exit points before another Middle East headline moves the market.

Australian traders can fund their account in AUD, with margin and profit or loss displayed in the account currency. Mitrade also offers mobile access for monitoring overseas markets and a demo account for testing a strategy before using real capital.

Under ASIC rules, retail commodity CFDs such as oil can offer leverage of up to 10:1. Leverage reduces the initial margin required but also amplifies losses as well as gains.

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      “Trade Oil CFDs with an ASIC-regulated broker. Fast AUD funding via PayID. ”  

Three developments now carry the most weight.

• Actual shipping flows: Tanker traffic through Hormuz and the Red Sea will show whether the physical shortage is improving or worsening. Fresh attacks would increase pressure; sustained normalisation could quickly soften prices.

• Saudi and Gulf infrastructure: Further damage to production, processing or export facilities would remove confidence that other regional producers can compensate for Iranian disruption.

• Diplomacy: A credible agreement restoring safer passage through Hormuz remains the clearest route to removing a large part of the current oil premium.

Demand and inventories will determine how strongly prices react to those developments. Another major supply loss in an already undersupplied market could send Brent materially higher. A reopening of key routes combined with weaker consumption could produce an equally sharp reversal.

Oil has already risen roughly 25% since early August. Above US$100, the focus is shifting from whether the conflict can move crude to how many barrels are actually disappearing from the market — and for how long.

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