Oil surges past $100 as Hormuz and Red Sea crises compound supply risks

Brent crude oil crossed the $100 mark on July 23, a threshold that had seemed distant just weeks earlier. The climb was steep—nearly a third higher than the lows of the previous month—but still shy of the $126 peak that April's conflict had briefly touched. What drove the surge was not a single shock but a compounding one: two of the world's most critical maritime passages were now under genuine threat of disruption, and the markets were pricing in the possibility that both could close at once.

The immediate trigger came from the Red Sea. On July 22, Houthi rebels based in Yemen claimed responsibility for attacks on two Saudi oil tankers and signaled their intention to keep disrupting traffic through those waters. This was significant because the Red Sea had become a crucial workaround. When the Strait of Hormuz—the narrow passage through which roughly half the world's traded oil normally flows—became effectively impassable due to escalating US and Iranian military operations, Saudi Arabia and the United Arab Emirates had pivoted to alternative routes. They were pushing crude through pipelines to ports outside the Gulf, and shipping it south through the Red Sea and the Bab el-Mandeb strait. Before the Houthi strikes, about 2.5 million barrels of Saudi oil were moving through that southern corridor daily. Combined with UAE exports, the Red Sea route was handling roughly 6.8 million barrels per day—nearly half of what would normally transit Hormuz.

Now that relief valve was at risk of closing. The timing was brutal. Just two weeks after US and Iranian forces had resumed direct strikes on each other—the Americans conducting their 12th consecutive night of bombing runs against Iranian missile storage, drone facilities, and air defense systems—the prospect of a second chokepoint being blocked sent energy analysts into urgent recalculation mode. If both Hormuz and the Red Sea became inaccessible, the global oil market would face a supply shock with few remaining escape routes. Shipping companies could still reroute around southern Africa, but that added four weeks to a voyage and more than a million dollars in fuel costs per trip. Those costs would flow directly to consumers and businesses.

The price signals were already visible at the pump. In the United States, average gasoline prices had climbed to $4.09 per gallon by Thursday, up from $3.92 a month earlier. In Germany, a liter of gasoline had reached nearly €2.15, a jump of 33 cents since the recent low point. Diesel was worse, climbing to €2.18 from €1.73. Similar increases were appearing across Pakistan, the Philippines, and other import-dependent economies. India's national oil companies were absorbing the costs for now, keeping domestic prices stable, but that cushion would not last indefinitely.

Wall Street was already gaming out the worst case. Goldman Sachs had warned that if Hormuz remained closed, oil could spike to $120 per barrel by the fourth quarter. That was well above the current $100, and it assumed the Red Sea remained passable. The bank's baseline forecast was for Brent to settle around $80, but baseline forecasts had a way of becoming obsolete when geopolitics shifted. When asked about the rising prices during an event in Georgia, President Trump offered reassurance that prices would fall, perhaps even below where they had started, but asked for time.

What made analysts genuinely nervous was the depletion of the emergency buffer. During the earlier phases of the Iran conflict, the US and other nations had released millions of barrels from their strategic reserves to cushion the price shock. Those reserves were now significantly lower. Refilling them at current prices would be expensive, and some analysts worried the US might instead impose export restrictions on crude and refined products to protect domestic consumers. Meanwhile, China—the world's largest oil importer—had cut its purchases to near-decade lows in the war's early months, partly because demand was soft and its own commercial stockpiles were large. But as those reserves slowly depleted, analysts expected Beijing to ramp up imports in the second half of the year. That demand surge, arriving just as supply routes were tightening, could push prices higher still.

The market was caught between two forces: immediate supply disruption and the prospect of rising demand meeting constrained supply. Neither was fully in control yet. The Houthis had made threats but had not yet achieved a total blockade. The US and Iran were trading strikes but had not escalated to direct naval warfare. But the structure was there, the vulnerabilities were exposed, and the math was unforgiving. If both chokepoints remained disrupted, the world would have to find a way to move oil around Africa, absorb the cost, and hope that strategic reserves and demand management could bridge the gap. If they did not, oil prices would keep climbing.