Oil breaks through $100 as the world’s energy escape routes begin to close

Oil prices surged to their highest levels in nearly two months on Thursday, with Brent crude briefly breaking above $100 a barrel as attacks on Saudi tankers opened a dangerous new front in the Middle East conflict.

The latest rally is not simply another emotional response to geopolitical headlines. It reflects a deeper and more troubling change in the market: traders are no longer worried about disruption at only one vital shipping route. They are now confronting the possibility that threats could simultaneously affect both the Strait of Hormuz and the Bab el-Mandeb Strait, restricting the two main maritime exits used to move Middle Eastern energy toward the rest of the world.

The Price

Brent crude futures climbed by around 6% to trade near $100 a barrel in the latest market update, after touching approximately $100.28 during the session, their highest level since late May.

US West Texas Intermediate crude rose by more than 5% to around $91.40 a barrel, having crossed the $90 threshold for the first time since June 11.

Both benchmarks extended their gains for a fifth consecutive session, but Thursday’s advance was far more aggressive than the previous increases, indicating that the market had begun to price a broader and more immediate threat to physical supplies.

A second chokepoint enters the conflict

The rally accelerated after Yemen’s Houthis said they had attacked two Saudi oil tankers in the Red Sea, with one vessel reportedly catching fire near the Bab el-Mandeb Strait.

The waterway sits at the southern entrance to the Red Sea and provides access to the Suez Canal, making it one of the most important trade routes connecting Middle Eastern and Asian energy supplies with Europe.

Its importance has increased dramatically because the Strait of Hormuz, the main export route for Gulf producers, is already operating under severe disruption amid the escalating conflict involving the US and Iran.

Until now, Saudi Arabia’s ability to redirect some oil exports toward the Red Sea had represented an important release valve for the market. The attacks have challenged that assumption.

The danger is no longer merely that one route may become unreliable. The danger is that the alternative route could also become unsafe.

Why $100 matters

The significance of Brent crossing $100 extends far beyond the psychological importance of a three-digit price.

Below that threshold, governments and central banks can still describe higher energy prices as a manageable geopolitical premium. Above it, the conversation begins to change.

At $100 oil, transport costs rise rapidly, airlines face heavier fuel bills, manufacturers pay more for energy and raw materials, and households are forced to redirect more of their income toward petrol, electricity and food.

The result is a form of inflation that central banks cannot easily control. Higher interest rates cannot reopen shipping lanes or extinguish a burning tanker, yet policymakers may still feel compelled to tighten monetary policy if expensive oil spreads through the wider economy.

This explains why oil’s rally is already affecting currencies, bonds and global equities. The market is no longer treating the conflict as an isolated commodity story. It is beginning to price the possibility of a renewed global inflation shock.

The market is pricing risk, not complete disruption

Despite the dramatic rise, oil prices are not yet reflecting a total shutdown of Middle Eastern exports.

Large quantities of crude are still reaching the market, strategic reserves remain available, and producers outside the region could gradually increase supply. The current price therefore represents a combination of actual disruption and a rapidly expanding insurance premium against what may happen next.

That distinction is crucial.

If shipping conditions stabilise, the geopolitical premium could retreat quickly, especially after such a sharp five-day rally. Oil markets have repeatedly shown that prices can fall almost as rapidly as they rise once fears of immediate shortages begin to fade.

But if tanker traffic becomes increasingly restricted through both Hormuz and Bab el-Mandeb, the market would have to move beyond pricing fear and begin pricing a genuine shortage of available barrels.

That would create an entirely different environment.

The hidden problem is not production

The most immediate threat facing the market is not necessarily whether Saudi Arabia, the UAE, Iran or other regional producers can pump enough oil.

The greater problem is whether that oil can be transported safely, insured at a reasonable cost and delivered on schedule.

A barrel trapped behind an unsafe shipping route has little practical value to a refinery thousands of kilometres away. That means the effective supply available to consumers can decline even if production itself remains relatively stable.

Freight costs, insurance premiums and journey times are therefore becoming almost as important as daily production figures.

Tankers forced to avoid the Red Sea and sail around the Cape of Good Hope face much longer voyages, tying up vessels for additional weeks and reducing the number of ships available to transport oil and fuel products. The market could consequently tighten without a single oilfield being permanently damaged.

Diesel sends an even louder warning

The pressure is already becoming visible in refined fuels.

European diesel margins have climbed to exceptional levels as Middle Eastern disruption combines with Russia’s restrictions on diesel exports and continued attacks on Russian refining infrastructure.

This matters because consumers do not purchase crude oil directly. They purchase petrol, diesel and aviation fuel.

A disruption that affects refining or product shipping can therefore cause fuel prices to rise much faster than crude itself. Even if Brent stabilises near $100, shortages in diesel or jet fuel could continue to increase the economic cost of the conflict.

Can oil reach $120?

The possibility can no longer be dismissed as an extreme scenario.

Brent could move substantially above $100 if the Strait of Hormuz remains severely disrupted and the security threat expands across the Red Sea. Some market projections suggest prices could exceed $120 later this year under a prolonged dual-chokepoint disruption.

Yet reaching and sustaining that level would require more than alarming statements and isolated attacks. The market would need evidence of lasting export losses, repeated tanker incidents or a sharp decline in the willingness of shipping companies to operate in the region.

The distinction between touching $120 and remaining there is also important.

A brief spike could be produced by panic, but a sustained move would require a structural shortage—and would probably begin destroying demand by slowing economic activity across major importing countries.

Oil outlook

The immediate trend remains bullish as long as the market sees no credible path toward safer navigation through the Strait of Hormuz and Bab el-Mandeb.

Brent’s ability to remain above $100 will now serve as an important test of whether buyers believe the supply threat is becoming permanent or whether Thursday’s surge has already absorbed much of the immediate fear.

A sustained move above the $100 area could open the door toward $105 and eventually $110, particularly if more vessels are attacked or major shipping companies suspend operations.

A retreat below the high-$90s, however, could indicate that the initial panic is fading and that traders still believe alternative supplies, strategic reserves and diplomatic pressure can prevent a deeper crisis.

For now, the oil market is sending a clear warning. The world may still have enough crude beneath the ground, but it is becoming much less certain that every barrel can reach the countries that need it.

That uncertainty—not a simple shortage of oil—is what has pushed Brent back into triple digits.