Brent crude has surged 13% in a week to trade above $110 a barrel, with WTI crossing $100 for the first time since June 2022, as the conflict with Iran shows no sign of resolution and the threat of a second major shipping disruption emerges in the Red Sea.
Goldman Sachs, the US investment bank, estimates that flows through the Strait of Hormuz, the narrow waterway through which roughly 20 million barrels per day of oil normally passes, have collapsed to just 5% of normal levels as fighting continues between US and Iranian forces.
The net hit to global commercial oil stocks currently stands at 11.4 million barrels per day, according to Goldman Sachs, exceeding the 10 million barrel per day assumption underpinning the bank's 2026 annual average Brent forecast of $85 per barrel.
Pipeline diversions via Saudi Arabia's Yanbu port on the Red Sea and the UAE's Fujairah terminal on the Gulf of Oman have partially offset the Hormuz disruption, redirecting 5.6 million barrels per day, with both routes now operating near full capacity.
However, a new threat has emerged to that alternative corridor, with Houthi forces in Yemen launching ballistic missiles at Israel and threatening to close the Bab el-Mandeb Strait to unfriendly vessels, the key waterway through which rerouted Saudi crude must pass to reach European and Asian markets.
Flows through the Bab el-Mandeb recently exceeded 7 million barrels per day for the first time since December 2023, when Houthi attacks on Red Sea shipping first began, making any renewed closure particularly damaging.
Diplomatic signals remain deeply contradictory, with President Trump claiming "great progress" in talks with Tehran while simultaneously threatening strikes on Iranian oil infrastructure, as the Pentagon reportedly prepares for weeks of potential ground operations.
Global visible oil inventories have declined by 130 million barrels since the conflict began, OECD countries have begun releasing strategic petroleum reserves, and prediction markets now put only a 36% probability on the conflict ending by mid-May, down 18 percentage points in less than a week.
Prediction market Polymarket shows traders pricing WTI crude oil hitting $120 per barrel by end of June at 62%, with an 83% probability of breaching $110 and a 92% chance of touching $105, reflecting the market's near-certainty that prices will hold elevated through the second quarter even if the conflict de-escalates modestly.
At the more extreme end of the distribution, bettors place a 35% probability on $140 and 13% on $200, a level that would represent a near-doubling from pre-conflict prices and historically associated with severe global economic disruption.
A separate Polymarket contract shows only a 36% chance of a US-Iran ceasefire occurring before crude hits $120, implying the market believes the $120 threshold is more likely to be breached than peace is to break out first.