Oil Shock on the Gulf: Hormuz Blockade Keeps Brent Above $100 as GCC Supply Gaps Widen

Amid the US-Iran conflict and a disruptive Strait of Hormuz blockade, Brent crude has soared over $100 per barrel. The Strait manages between 65% and 80% of GCC crude. The blockade has caused a quick increase in storage and forced Saudi Arabia and other producers to cut output by about 2-2.5 million bpd, resulting in a shortfall of several million bpd. Sanctions limiting Russian exports aggravate the situation, therefore increasing the worldwide supply shortage.

With prices rising 50–60% since March and cresting around $120 before the protracted truce extension, this supply squeeze has generated a significant geopolitical premium. The continuous threat of Hormuz-related violence continues to support this premium, and many analysts see the disruption as one of the most important shocks in recent history, thereby overturning previous predictions for Brent to stay in the $60-80 range.

Demand side is still weak with just little worldwide growth, but the energy shock is driving up customer prices; US petrol has topped $4 per gallon and inflation concerns remain. Although a de-escalation may swiftly reduce about $20–30 per barrel via spare capacity, the present tensions are expected to maintain prices high for the immediate future unless a significant resolution happens.