reached $105.20 a barrel by 8:00 a.m. ET Thursday, up $3.15 from the same time Wednesday and roughly $37.30 above where it traded a year ago. By mid-session the benchmark was quoted at $105.37, a gain of 3.6% and the highest level since May.
West Texas Intermediate for October delivery did the more symbolically important thing. The contract surged 4.2% to touch $100.10 intraday, its first print above the century mark since the spring, before settling back to $99.35 for a $3.30 gain, or 3.44%. The session had opened far quieter — WTI was at $96.29 in the pre-dawn hours, up just 0.2%, then $96.85, then $97.47 as European trade got going. The bulk of the move came after the U.S. open.
The rally has been building for over a week. WTI closed Wednesday near $96.70, its highest since May, in what marked the sixth advance in seven sessions and the longest winning run of the year. Brent cleared $101.5 on Wednesday and had already breached $100 for the first time since July 24 earlier in the week.
The monthly and annual numbers put the move in context. Brent is up 13.88% over the past month and 52.56% compared with the same time last year. That is not a spike. That is a re-rating.
The transmission into everything else was immediate. The climbed 8 basis points to 4.90%, its highest since November 2023. August producer prices came in at 5.4% annually against a 5.3% forecast. Market-implied odds of a Federal Reserve hike at the September 15–16 meeting moved to between 62% and 64%. The fell 0.61% and the jumped 9.23% to 17.98.
European prices climbed to fresh three-and-a-half-year highs, the strongest since late 2022, and the European Central Bank raised its deposit rate 25 basis points to 2.50% while naming the Middle East conflict explicitly as an inflation driver.
Gasoline at the pump has already risen with the crude move, two months before a U.S. midterm election.
Kharg Island, the Jazan Refinery, and a Carrier Under Ballistic Attack
The escalation behind the price is specific and it broadened materially over the past week.
U.S. officials reported that Iran attempted to attack Navy ships on Monday, following a previously undisclosed wave of attacks over the weekend in which an aircraft carrier was targeted with ballistic missiles. Iranian state media said a U.S. missile struck a small oil tanker four miles from Kharg Island on Tuesday — Kharg being the terminal that historically handled the overwhelming majority of Iranian crude exports.
The war then widened beyond the two combatants. Iran-backed Houthi militants attacked several energy facilities in Saudi Arabia, forcing a temporary halt to some operations. Among the targets was the Jazan refinery in the kingdom’s south, a 400,000-barrel-a-day facility. Attacking Saudi downstream infrastructure converts a bilateral conflict into a regional supply event and puts every Gulf producer’s assets inside the risk perimeter.
Overnight Tuesday into Wednesday, multiple American military aircraft were damaged in Iranian strikes at Muwaffaq Salti Air Base in Jordan. One A-10 lost a wing. Roughly eight F-15s sustained light damage and were returned to service. No U.S. deaths were reported.
The President warned Iran “not to get cute” over activity at a suspected nuclear site at Pickaxe Mountain, near the heavily damaged Natanz enrichment facility, saying the U.S. would have to hit them very hard.
Running against all of that is one de-escalatory thread. Iran and Oman are reported to be close to an agreement on managing shipping through the Strait of Hormuz. Traders have jumped on every such signal this year, which is why crude price rises have stayed relatively contained relative to the scale of the physical disruption. That behaviour will not hold indefinitely.
The central point for anyone forecasting this market: no agreement between Washington and Tehran to reopen the waterway has emerged, and both sides continue issuing public demands. Resuming flows through Hormuz remains the single most important variable in easing pressure on energy supplies, prices and the global economy.
The Arithmetic That Matters: Demand Down 1.6 mb/d, Supply Down 4.3 mb/d
The reason $105 Brent is sustainable is not strong demand. Demand is collapsing. Supply is collapsing faster.
The International Energy Agency forecasts world oil demand to decline by 1.6 million barrels a day in 2026 — a downgrade of 510,000 b/d from the prior month’s estimate — as the ongoing closure of the Strait of Hormuz and elevated fuel prices weigh on consumption. The second-half forecast was cut by roughly 550,000 b/d.
Against that, global oil supply is forecast to fall by 4.3 million barrels a day in 2026, to 102 mb/d, with growth of 1.4 mb/d from the Americas only partly offsetting losses in the Middle East and Russia.
A market where demand falls 1.6 mb/d and supply falls 4.3 mb/d is a market in deficit by roughly 2.7 mb/d. That is the entire explanation for a benchmark at $105 while the IMF has cut its global growth forecast to 3% from 3.3% since the war began.
The quarterly path shows the demand destruction easing rather than deepening. Annual contractions moderate from 4.9 mb/d in the second quarter to 2.8 mb/d in the third, before returning to growth in the final quarter. Demand is projected to expand by 2.4 mb/d in 2027.
That inversion is the most important forward-looking fact in this market. The agency reading the damage most pessimistically for 2026 is the most bullish on 2027, because it interprets the shortfall as a blockage rather than a collapse — oil that cannot reach buyers rather than demand that has vanished. The deeper this year’s hole, the steeper the climb out once Hormuz reopens.
Supply is projected to rebound 8.3 mb/d next year to 110.3 mb/d. A market that loses 4.3 mb/d and then adds 8.3 mb/d does not stay at $105.
Timing that transition is the entire trade.
8.3 Million Barrels a Day of Gulf Output Is Still Shut In
The number that sets the floor under this market is 8.3 million barrels a day.
That is how much Gulf production remained shut in as of the latest supply accounting. Global oil supply rose 2.4 mb/d to 101.5 mb/d in July — a genuine recovery month — and still sat 6.3 mb/d below year-earlier levels. Renewed hostilities and maritime disruptions in July and early August then reduced projected third-quarter supply by 1.7 mb/d versus the prior estimate.
The loading data shows how unstable the recovery is. Gulf loadings peaked at 20 mb/d at the start of July and dropped to around 12 mb/d later in the same month. An eight-million-barrel swing inside four weeks is not a market finding equilibrium; it is a market hostage to whether ships sail on a given day.
Historical comparison establishes the scale. Global supply plummeted 10.1 mb/d to 97 mb/d in March, the largest single-month disruption ever recorded. By April, output from Gulf countries affected by the closure was 14.4 mb/d below pre-war levels, and total supply losses since February reached 12.8 mb/d. Gulf crude and condensate loadings were slashed by about 10 mb/d from February, to 8.4 mb/d. The flow of crude, refined fuels and natural gas liquids through the Strait fell to just 3.8 million b/d in early April, down from more than 20 million b/d before the strikes began.
North Sea Dated traded around $130 a barrel in April, roughly $60 above pre-conflict levels.
Measured against that, $105.20 Brent today is well below the peak of the disruption, which tells you the market has already priced substantial recovery. It also tells you what the ceiling looks like if Hormuz closes harder: the April high, not the current price.
The 8.3 mb/d of shut-in capacity is simultaneously the bull case and the bear case. It is why the market cannot rebalance now, and it is the reservoir that floods the market the moment transit resumes.
Global Inventories Below 7.9 Billion Barrels for the First Time Since April 2025
The inventory buffer that absorbed the first phase of this shock is running out, and that changes the risk profile of every subsequent disruption.
Global observed oil inventories fell by 69 million barrels in July to just under 7.9 billion — the first time below that threshold since April 2025. Stocks have declined 410 million barrels since the war began.
The mechanics of the drawdown were unusual. In March, global observed inventories fell 85 mb, but stocks outside the Middle East Gulf were drawn down by 205 mb, or 6.6 mb/d, as flows through the Strait were choked off. Simultaneously, with limited outlets after the effective closure, floating storage of crude and products inside the Middle East rose by 100 mb and onshore regional crude stocks rose 20 mb. China added 40 mb to tanks.
That geography matters enormously. The barrels that disappeared were the ones consumers could reach. The barrels that accumulated are sitting behind a closed waterway. Global inventory statistics look better than the accessible supply picture actually is.
China’s behaviour has since flipped. Purchases from China have been supporting prices for African, Canadian and Latin American crude as the country restocks dwindling oil and fuel inventories, after limiting imports of more expensive product earlier this year because of the war. A Chinese restocking cycle at $105 Brent is a substantial new source of demand precisely when the buffer is thinnest.
The strategic read is straightforward. Although the market is projected to return to surplus toward the end of this year, the urgency of reopening the Strait has increased as previously available inventory cushions rapidly deplete. Sharp cutbacks in crude imports from Asian buyers and stock draws mitigated the early impact on global supplies and prices. As those cushions contract and import cuts dissipate, supply shortages worsen.
Put plainly: the shock absorbers that kept Brent from going to $130 and staying there are close to spent. The next disruption of comparable size hits a market with no reserve capacity to draw on.
A 2.2 Million Barrel Disagreement Between the Two Forecasters Who Matter
The two institutions the market relies on cannot agree on what the world will burn this year, and the gap is enormous.
The IEA expects global demand to fall by 1.6 mb/d in 2026. OPEC still expects demand to grow, though its estimate has been trimmed for a fourth consecutive month, to 580,000 b/d from 780,000 b/d. The two sets of numbers imply a difference of roughly 2.2 million barrels a day in 2026 consumption.
That is not a rounding discrepancy. It is larger than the entire annual production of most OPEC members, and it means one of the two is wrong about the single most important variable in the market.
The producer group has consistently argued the war has done less damage to consumption than Western forecasters believe. The consumer-side agency argues that elevated fuel prices, constrained product availability and disrupted supply chains have destroyed real demand across petrochemicals, aviation and freight.
Both cannot be right, and the resolution determines whether $105 is a peak or a waypoint. If OPEC’s number proves closer, the deficit is far larger than currently modelled and Brent has substantial upside from here. If the IEA’s number holds, demand destruction is doing the rebalancing work that supply cannot, and the market caps out near current levels.
Where the two converge is 2027. OPEC now expects demand to grow 2.2 mb/d next year, upgraded from 1.94 mb/d. The IEA goes further at 2.4 mb/d. The gloomier forecaster for this year delivers the more bullish read for next.
Refining capacity is the constraint neither forecast fully captures. Middle East and feedstock-constrained Asian refineries cut runs by around 6 mb/d at the depth of the disruption, to 77.2 mb/d, and global crude runs were expected to decline 1 mb/d on average in 2026 to 82.9 mb/d. Refining capacity dictates the price of gasoline and diesel, and it has become severely constrained — which is why consumers feel this more acutely than the crude price alone suggests.
The EIA’s September Outlook: $90 Now, $77 by Q2 2027, $67 by Late 2027
The U.S. government’s own forecast, released September 9 with data completed September 3, is the cleanest official baseline available.
The Short-Term Energy Outlook reports that Brent averaged $91 a barrel in August, $7 higher than July, as total Middle East exports remained constrained and more production was shut in across the region.
The forward path is explicitly a decline. Brent is forecast to average around $90 a barrel across the second half of 2026 — a figure revised $8 higher than the prior month’s outlook, which tells you how fast the agency is chasing the market upward. As exports from the Middle East gradually increase and shut-in production restarts, prices are forecast to fall to an average of $77 by the second quarter of 2027. Most shut-in production is assessed to be largely restored during the second half of 2027, at which point global inventories start building again and Brent averages $67.
The agency attaches an explicit caveat: continued volatility in flows both through the Strait of Hormuz and through alternative routes, based on changing conditions in the conflict, will likely produce more short-term price volatility than the forecast itself indicates.
Note the gap between the forecast and the tape. The official second-half 2026 average is $90. Brent traded $105.20 Thursday morning. Either the market is carrying a $15 risk premium the forecast does not model, or the forecast is about to be revised higher again next month.
The revision history argues for the second interpretation. This is a forecast that has moved up $8 in a single month, having previously modelled a world where Brent averaged $70 in the fourth quarter of 2026 and $64 across 2027. Every monthly update since the war began has marked prices higher and supply lower.
The structural view underneath is worth holding onto regardless. Once flows are reestablished through Hormuz, production is expected to outpace consumption, with inventories building at an average of 1.9 million b/d in 2026 and 3.0 million b/d in 2027. Growing inventories weigh on prices. That is the mechanism that takes Brent from $105 to $67, and it is entirely contingent on the waterway.
