Brent crude climbs above $90 as Middle East supply disruptions persist

Brent crude rose above $90 a barrel as the market treats Middle East supply disruptions as a new baseline, with the Strait of Hormuz closed since May and cumulative losses exceeding 1.3 billion barrels.

"Geopolitical factors are providing a floor under prices," BNY said in a note, even as potential easing of Venezuela sanctions introduces downside risk to the supply outlook.

WTI crude climbed above $85.50 a barrel, while Brent traded at $90.55 on Aug. 28. The Strait of Hormuz, through which about 20 percent of global oil consumption passes, has been effectively closed since early May. The IEA estimates a Q3 supply deficit of 1.8 million barrels per day, while forecasting global demand to decline by 1.6 million barrels per day in 2026.

The sustained premium carries broad implications. Goldman Sachs expects Brent to trade between $80 and $90 until a new U.S.-Iran agreement emerges or supply conditions stabilize. J.P. Morgan forecasts $86 for Q3, declining to $80 in Q4 and $78 by year-end. Higher energy costs feed into inflation, complicating Federal Reserve policy decisions and squeezing consumer spending across major economies.

Strait of Hormuz Closure Reshapes Supply Calculus

The effective closure of the Strait of Hormuz represents the most significant supply interruption in a generation. Tankers have been rerouting through longer, more expensive paths around Oman, adding both time and cost to global energy delivery. The IEA's cumulative loss estimate of 1.3 billion barrels reflects structural damage to regional production capacity from the ongoing U.S.-Iran conflict, which has expanded attacks across the region throughout 2026.

Energy analysts warn that even a partial reopening would not immediately ease prices. The supply deficit of 1.8 million barrels per day in Q3 reflects damage to infrastructure that would require repairs and a cessation of hostilities before sustained price declines could occur. The U.S. Energy Information Administration projects an average of $85 for the third quarter, with prices beginning to fall only when geopolitical conditions improve.

Historical precedent supports the view that elevated prices persist. During the 1990-1991 Gulf War and the 2011 Libyan civil war, oil markets remained elevated for months after initial shocks, according to research from the Center for Economic and Policy Research. The current situation, with a chokepoint closure rather than a temporary disruption, suggests a longer adjustment period.

Forecasters See $80-$90 Range Until Resolution

Major energy forecasters expect oil to remain in the $85-to-$90 range through the third quarter. Goldman Sachs expects Brent to trade between $80 and $90 per barrel until either a new U.S.-Iran agreement emerges or supply conditions stabilize. J.P. Morgan Global Research forecasts Brent at $86 per barrel for Q3, declining to $80 in Q4 and $78 by year-end, assuming some resolution of tensions.

The market is already tight, with OPEC+ production cuts and strong demand keeping inventories low, making prices more sensitive to geopolitical shocks. Trading volumes for WTI options and futures increased as investors sought to hedge against further upside moves. Some market participants view the rise as overdone in the absence of an actual supply disruption, while others argue the risk premium is justified given the potential for escalation.

For consumers and the broader economy, higher oil prices translate into increased costs for gasoline, diesel, and jet fuel, which feed into inflation. For central banks, including the Federal Reserve, a sustained rise in energy prices could complicate efforts to manage inflation, potentially influencing interest rate decisions. For businesses, energy costs are a key input, and sustained high prices could squeeze margins.

The situation remains fluid, and prices could retreat if diplomatic channels show progress. Traders will be watching for any further developments that could either escalate or calm the situation, with prices likely to remain sensitive to headlines.

This article is for informational purposes only and does not constitute investment advice.