Oil Markets Brace For $100 Crude As Strait Of Hormuz Closure Persists

(MENAFN- Daily News Egypt) Global energy executives and traders warned that oil prices are set to reach $100 per barrel within days as the near-total halt of shipping through the Strait of Hormuz transforms a long-held worst-case scenario into a reality.

The escalating conflict has pushed Brent crude past the $90 mark, with gains exceeding a quarter of its value over the past week. Executives from four major energy companies, speaking on condition of anonymity, stated that the market continues to underestimate the risks of a prolonged closure of the vital waterway. They projected that prices would hit $100 within days in the absence of military de-escalation.

The physical energy market is already showing signs of severe strain. Middle Eastern and Asian refineries have implemented production cuts, driving up prices for refined products. Diesel prices surged by more than 50% in a week, while jet fuel surpassed $200 per barrel in some regions. European natural gas prices have also risen by approximately two-thirds.

Bob McNally, president of Rapidan Energy Group and a former White House official, said the market is still adjusting to the potential duration of the Hormuz closure. He predicted Brent crude would reach $100 per barrel or higher in the coming days or weeks once it becomes clear that the disruption is not short-term.

The supply crisis is further evidenced by a rapidly diminishing number of empty supertankers in the Gulf. Iraq began reducing its output last week, and Qatar has halted liquefied natural gas (LNG) production as storage facilities reach capacity. Aldo Spanjer, head of energy strategy at BNP Paribas, warned that full land-based storage could force the closure of production wells as early as March, further supporting the upward price trend.

Regional producers are attempting to reroute supplies, with Saudi Arabia transporting some volumes over 1,000 km to Red Sea ports. The United Arab Emirates is utilising an alternative route via the port of Fujairah, exporting over 1m bpd. However, these combined alternatives account for only about a third of the approximately 20m bpd that normally transits the Strait of Hormuz.

The price spike presents a significant challenge for U.S. President Donald Trump, who has frequently maintained his ability to keep fuel costs under control. Gasoline prices have reached their highest levels during his presidency, and White House attempts to calm the markets last week have yet to yield results.

Despite the pressure, President Trump strike a calm tone on Tuesday, telling Reuters:“If prices go up, so be it; this is much more important than gasoline prices going up a little bit.”

The U.S. administration has issued a general licence allowing Indian refineries to purchase Russian oil cargoes previously stranded by sanctions, though analysts view this as a temporary measure. Kevin Hassett, director of the White House National Economic Council, told Bloomberg TV that the administration has a“full suite of tools” available and expressed optimism that the“short-term problem” would be resolved quickly.

However, maritime industry figures remain sceptical of U.S. proposals to provide insurance guarantees and naval escorts. Three tanker owners and sources close to regional allies said they have received no details regarding the plan. Halvor Ellefsen, a director at Fearnleys Shipbrokers UK, noted that sailing in convoys could make tankers“easy targets,” adding that he sees no short-term solution to the economic pain and inflation caused by the disruption.

While the International Energy Agency (IEA) has stated there is currently no need for a coordinated release of strategic stocks, some nations are less certain. Reports from Kyodo News indicate that Japan is considering a unilateral release from its strategic reserves. Fatih Birol, Executive Director of the IEA, maintained that there are“plentiful amounts of oil” in the market despite the“disruption in supply flows.”

In response to the domestic supply crunch, China has instructed its largest refiners to suspend exports of petrol and diesel, a move followed by several other Asian nations. Meanwhile, the Financial Times reported that Qatar's energy minister warned oil could reach $150 per barrel if the conflict is not resolved soon.

Amos Hochstein, managing director at TWG Global and former advisor to Joe Biden, warned that the market facesfurther volatility.“If the Strait remains closed when oil returns to trading tomorrow evening, I think the price jump will be much larger,” he said.

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