Brent crude has surged toward $92 per barrel as the US-Iran ceasefire lapses and attacks on Middle East oil infrastructure escalate. Shrinking US strategic reserves and falling tanker traffic through the Strait of Hormuz are adding to the pressure that could push prices above $100 a barrel.
Ceasefire lapses as conflict escalates
The 60-day ceasefire between the US and Iran has expired, and Washington has no intention of extending it, while Tehran has threatened to escalate the conflict. Iran has seized a tanker in the Strait of Hormuz, and the Houthis have stepped up attacks on oil infrastructure in the Red Sea. As a result, Brent has surged toward $92 per barrel, lifting the odds of Fed tightening and pushing the dollar index higher.
Fed tightening odds swing back up
Slowing US inflation in June and July came mainly from falling energy prices as the Middle East conflict cooled. That drop had pushed the probability of a September rate hike down to 34%, while the odds of a hike by the end of 2026 eased to 64%. But after Iran's tanker seizure and Donald Trump's threat to bomb Oman if it kept obstructing the US blockade, the risk of tightening this year climbed back to 70%, giving the dollar a boost.
Shadow fleet cushions the supply shock
Brent is not rising as fast as many expected. Talk of North Sea crude soaring to $150 a barrel circulated when the conflict began, yet the bulls have made only modest gains, largely because Strait of Hormuz throughput and shadow supply have fallen less sharply than expected.
According to Kpler, transit volumes have fallen from a pre-war 18 million barrels per day to 4.9 million bpd, though a Bloomberg insider claims the real figures run much higher. The US Department of Energy has cited a figure of 9 million bpd, likely reflecting the shadow fleet and alternative routes, while Kpler estimates Middle East exports have dropped from 21 million bpd to 9.5 million bpd.
Meanwhile, US strategic reserves have fallen to their lowest level since 1982, losing 5.3 million barrels in the past week alone. The market is coming to terms with the idea that the supply disruption is not a temporary shock but a new reality, and the shrinking safety cushion is adding to the risk that oil rallies above $100 a barrel.
Source: ActionForex
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