Strait of Hormuz to stay closed until 2027 as oil tops $100

Brent crude rose above $100 a barrel Thursday for the first time since May, after Yemen's Houthi rebels attacked two Saudi oil tankers in the Red Sea and the U.S. military launched a 13th consecutive night of strikes on Iran. The waterway, through which a fifth of the world's traded oil and gas once passed, has been effectively shut since Iran retaliated against the U.S.-Israeli military operation in February by blocking commercial shipping.

"The Strait of Hormuz is not expected to reopen until next year," Matt Smith, director of commodity research at Kpler, said in a CNBC interview Thursday. "The supply gap that was temporarily filled by strategic reserve releases and production increases is now widening again as those buffers run dry."

The U.S. strategic petroleum reserve has fallen so low that its structural integrity is starting to strain, according to analysts, while the International Energy Agency's coordinated release of roughly 400 million barrels from more than 30 countries is largely exhausted. China, which helped stabilize global markets by halting crude purchases for its refineries after the war began, has resumed buying, removing a critical demand-side cushion. Benchmark Brent crude has climbed from less than $72 a barrel before the conflict to above $100, with Goldman Sachs warning that prices could push significantly higher if the strait remains closed through 2027.

Why the Strait Won't Reopen Soon

Iran's leadership has shown no willingness to restore prewar shipping terms. Foreign Minister Abbas Araghchi has adopted an "eye for an eye" doctrine, vowing a "powerful and decisive response" to any infrastructure strikes. Parliament Speaker Mohammad Bagher Qalibaf, who has led negotiations with the U.S., said the strait's "situation will not return to prewar conditions," insisting that Tehran has the right to manage traffic and potentially charge fees in the waterway that was toll-free before the conflict.

Diplomatic efforts have stalled. An Arab diplomat told the Associated Press that Gulf states are increasingly pessimistic about finding an off-ramp, with Pakistan's mediation showing no public progress. The U.S. has re-imposed a naval blockade on Iranian ports, while President Donald Trump has threatened to destroy Iranian bridges and power plants in response to any attack on ships in the strait. The U.S. has spent $37.5 billion on the war so far, Defense Secretary Pete Hegseth estimated in a Senate hearing this week.

A Second Chokepoint Under Threat

The supply crisis is compounding. Yemen's Houthi rebels, who are backed by Iran, have declared a blockade on Saudi-linked shipping through the Bab el-Mandeb Strait at the southern tip of the Arabian Peninsula, threatening the alternative export route Saudi Arabia has relied on since Hormuz closed. The kingdom has diverted millions of barrels a day to its Red Sea port of Yanbu via an overland pipeline, but the Houthi attacks on two tankers this week raise questions about the viability of that route, according to maritime data firm Lloyd's List Intelligence.

The last time a disruption of this magnitude occurred — the 1973 Arab oil embargo — crude prices quadrupled over six months and triggered rationing across the U.S. and Europe. While the current crisis has not yet reached that severity, the depletion of emergency stockpiles and the absence of a diplomatic resolution leave the global economy with far less cushion than it had four months ago. Iran's Health Ministry reports 55 people killed and 629 wounded since U.S. airstrikes resumed on June 27. United Nations Secretary-General Antonio Guterres warned Thursday that the region is being pulled "into an ever-widening circle of confrontation."

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