Brent Sets Largest Ever Monthly Gain, Could April Hit $150? How High Will This Middle East Conflict Push Oil Prices?

TradingKey - Yemen's Houthi rebels joined the conflict in the Middle East, sparking intense market fears that the spillover of the conflict could disrupt the energy order, causing international oil prices to surge.

As of March 30, Brent crude prices rose nearly 60% for the month, shattering the previous single-month record of 46% set during the 1990 Gulf War and reaching a new historic high.

Since March, Brent crude prices have continued to soar, at one point hitting $119.50 per barrel, their highest level since June 2022.

In an interview, U.S. President Trump sent a hawkish signal regarding Iran, stating that "seizing oil" is one of the priority options and comparing this idea to the U.S. takeover of Venezuela's oil sector, while mentioning the "possible seizure of Kharg Island" and stating that "U.S. troops would need to be stationed on the island for a while," which undoubtedly further exacerbated market anxiety over energy supplies.

Will Brent crude break $150 in April?

Despite the joint announcement by several countries on March 11 to release 400 million barrels of emergency oil reserves, oil prices continued to climb against the trend that month. Estimates from BloombergNEF show that the Middle East conflict has reduced global daily oil supply by 9 million barrels, with the pressure from the supply-demand gap far outweighing the hedging effect of the reserve release.

U.S. President Trump's previous remarks on "negotiation progress" briefly depressed oil prices, but as he announced in late March a 10-day extension for Iran to reopen the Strait of Hormuz, oil prices immediately rebounded and U.S. stocks fell in tandem—clearly, the market is no longer buying the White House's verbal intervention.

As City Index analyst Fawad Razaqzada put it: "Investors are more focused on potential supply risks than verbal stabilization efforts."

A recent research report from Societe Generale pointed out that the three-way standoff between the U.S., Israel, and Iran continues to escalate, and the reopening of the Strait of Hormuz has been delayed from the expected March to mid-to-late April. Brent crude is expected to enter a phase of "prolonged high-level operation."

Affected by nearly 15 million barrels per day of supply disruptions in the Gulf region, increased refinery outages, and rising infrastructure risks, the bank expects the average Brent crude price in April to reach $125/bbl, with potential spikes as high as $150/bbl.

The bank's analysts judge that there is no possibility of easing the current situation in the short term, the market will face a massive crude oil supply gap, the recovery of crude oil production and shipping in the Gulf region will be slow, and inventory rebuilding can only progress gradually.

In its baseline scenario, Societe Generale assumes a two-month closure of the Strait of Hormuz causing lasting supply damage, with OPEC supply disruptions reaching 15 million bpd in March and the gap remaining at 8 million bpd in mid-to-late April; production in GCC countries will decrease by at most 3 million bpd by the end of the year, and Iran will lose 2 million bpd of export capacity for the remainder of 2026.

However, starting in May, as additional OPEC supply gradually recovers, coupled with the release of strategic petroleum reserves by G7 countries and the resumption of purchases by Chinese buyers, oil prices will gradually fall, potentially dropping to around $80/bbl by December.

Middle East conflict rattles markets

Since the conflict broke out on February 28, the fighting has rapidly spread across the Middle East. Hezbollah has long been deeply involved, and Yemen's Houthis also launched an attack on Israel last Saturday, bringing global attention to security risks in the Red Sea shipping lanes.

JPMorgan Chase analysts warned that the scope of the conflict has expanded from the Persian Gulf and the Strait of Hormuz to the Red Sea and the Bab el-Mandeb Strait—these two waterways are core chokepoints for global crude and refined product transportation.

If oil exports through the Red Sea are blocked, Saudi Arabia would need to redirect crude to the Suez-Mediterranean Pipeline (SUMED). The pipeline has a design capacity of 2.5 million bpd, and the currently active East-West pipeline has a transport capacity of 7 million bpd.

According to data from energy analytics firm Kpler, the volume of Saudi crude exported through the Red Sea port of Yanbu, bypassing the Strait of Hormuz, reached 4.658 million bpd last week. Should exports from Yanbu be disrupted, Saudi crude transport would have to rely on the SUMED pipeline.

Amid the global market turmoil in March, oil emerged as the only standout asset. The Dow Jones Industrial Average fell over 10% from its historic high, entering correction territory; government bonds and precious metal prices weakened simultaneously, with gold's safe-haven status failing completely—since early March, spot gold prices have plummeted nearly 15%, marking not only its worst single-month performance since 2008 but also its fifth-largest monthly decline in nearly 50 years.

Ed Yardeni, president and chief investment strategist at Yardeni Research, said that as the risk of a prolonged conflict rises, global equity markets are beginning to reflect market expectations of "higher for longer" oil prices and interest rates.