Brent Crude Nears $110 as Hormuz Supply Disruption Tightens Global Oil Market

Brent crude surged to within cents of $110 per barrel on Friday as worsening disruptions along major Middle Eastern shipping routes intensified concerns over the availability of oil and refined petroleum products.

The international benchmark climbed as high as $109.97 per barrel, its strongest level in four months, before retreating to around $106 as reports of possible diplomatic discussions with Iran encouraged some traders to take profits.

Despite the pullback, Brent remained on course for a weekly increase of about 10 percent and its first weekly close above $100 since May.

West Texas Intermediate (WTI), the U.S. benchmark, also remained above $100 per barrel after both contracts gained more than 6 percent on Thursday.

The sharp increase reflects a global oil market increasingly concerned that disruption to Middle Eastern supply routes will last longer than previously anticipated.

Hormuz Traffic Falls Further

At the centre of the latest rally is the Strait of Hormuz, one of the world’s most important energy corridors.

Before the conflict, roughly 20 million barrels per day of crude oil and petroleum products passed through the waterway, representing about a quarter of global seaborne oil trade.

The route is particularly important for exports from Saudi Arabia, Iraq, the United Arab Emirates, Kuwait and Iran.

Shipping activity through the strait has fallen sharply as attacks on vessels increase the risks facing tanker operators.

Preliminary tracking data showed only seven vessels transited the strait on Thursday, compared with 11 a day earlier and a 10-day average of 15.

The latest reduction followed an escalation in attacks involving Iran and the United States.

Iran said it attacked 10 vessels around Hormuz on Wednesday after the United States struck five Iranian oil tankers, increasing concerns that commercial shipping could face further disruption.

For the oil market, the problem extends beyond barrels physically prevented from leaving the Gulf.

Greater risks to tankers can raise insurance, freight and security costs, increasing the effective price of moving crude even when cargoes continue to sail.

Middle East Supply Problem Spreads Beyond Hormuz

Concerns are also spreading to other important shipping routes.

Iran-aligned Houthis took control of Yemen’s port of Mocha on Thursday, adding another potential threat to commercial traffic through the Red Sea.

The development increases pressure on a global energy system already struggling with reduced Gulf exports.

Saudi Arabia and the United Arab Emirates have some capacity to bypass Hormuz through alternative pipelines, but those routes cannot replace all the oil normally shipped through the strait.

The International Energy Agency estimates that approximately 3.5 million to 5.5 million barrels per day can potentially be redirected through alternative routes.

That compares with around 20 million barrels per day of oil that moved through Hormuz in 2025.

Other major Gulf producers have substantially fewer alternatives, making normal maritime access crucial to their ability to reach international customers.

IEA Sees Disruption Extending Into 2027

The possibility that supply constraints could persist well into next year is adding further support to oil prices.

The International Energy Agency now expects the recovery in Middle Eastern oil flows to stretch into 2027 as continuing conflict and restrictions on Gulf shipping delay a return to normal exports.

The agency expects global oil supply to decline by about 5.7 million barrels per day in 2026.

Supply had already fallen by approximately 1.6 million barrels per day in August.

The prolonged disruption has forced the IEA to reassess demand as well.

Global oil consumption is now projected to fall by approximately 2.5 million barrels per day this year to 102.4 million barrels per day as high energy prices and shortages reduce consumption.

That is a significantly larger contraction than previously expected.

The unusual combination demonstrates the severity of the current energy shock: supply is falling sharply enough to drive prices higher, while those higher prices are simultaneously destroying demand.

Diesel Market Comes Under Severe Pressure

The impact is particularly visible in refined petroleum products.

Diesel prices have risen faster than crude as disruption to Middle Eastern exports combines with attacks on Russian refining infrastructure.

U.S. average diesel prices moved above $6 per gallon for the first time, highlighting how the supply shock is moving from international crude benchmarks into the real economy.

Refining margins have also widened substantially as available supplies of diesel, gasoline and other products tighten.

This creates an unusual advantage for refiners capable of maintaining high production rates.

Crude oil prices are rising, but prices for some finished petroleum products are increasing even faster, potentially improving margins for refineries with secure feedstock and access to export markets.

$100 Oil Revives Global Inflation Concerns

The oil rally is also spreading rapidly into financial markets.

Higher energy prices have revived concerns that inflation could remain elevated, forcing central banks to maintain restrictive monetary policies for longer than previously expected.

U.S. 10-year Treasury yields moved close to 5 percent on Friday as investors reassessed expectations for interest rates.

The European Central Bank has already raised rates, while markets are increasingly considering the possibility that the U.S. Federal Reserve could tighten monetary policy again.

Higher crude prices affect inflation through more than petrol and diesel.

Energy costs influence freight, aviation, manufacturing, agriculture and electricity generation, allowing an oil shock to spread across consumer prices.

The longer Brent remains above $100, the greater the risk that central banks will have to respond to those secondary effects.

Nigeria Could Benefit From Stronger Crude Demand

For Nigeria, the rally presents both an opportunity and a risk.

As an oil exporter, the country stands to receive more revenue for every barrel sold internationally, particularly as buyers search for crude outside the Middle East.

West African grades are already attracting increased interest from international refiners seeking alternative supplies.

That could support both prices and differentials for Nigerian crude.

The development comes as Dangote Petroleum Refinery is simultaneously increasing its purchases of Nigerian crude, including at least 16 million barrels secured for October.

The combination of stronger domestic refinery demand and growing international interest could tighten the amount of Nigerian crude available for export.

Nigeria would benefit most if it can increase production sufficiently to take advantage of both markets.

However, sustained oil prices above $100 also carry significant domestic costs.

Higher crude prices increase the cost of producing and importing petroleum products and can eventually translate into higher petrol, diesel, transportation and manufacturing expenses.

Nigeria could therefore earn more dollars from crude exports while simultaneously facing stronger inflationary pressure at home.

Oil Market Remains Extremely Sensitive to Diplomacy

Friday’s retreat from almost $110 to around $106 illustrates how quickly the market can move in either direction.

Prices fell after reports suggested Middle Eastern governments were exploring an arrangement with Iran that could improve shipping access through Hormuz.

Any credible agreement allowing more tankers to move safely through the strait could remove part of the geopolitical premium currently embedded in crude prices.

A further escalation could have the opposite effect.

With Hormuz traffic still severely restricted, attacks spreading across regional shipping routes and the IEA no longer expecting a rapid restoration of Middle Eastern oil flows, the global market has little room for another major supply shock.

Brent’s move to $109.97 therefore represents more than another geopolitical price spike.

It reflects a market increasingly pricing the possibility that disruption to one of the world’s most important energy-producing regions could persist well into 2027, keeping crude and refined-product prices elevated even as higher costs begin to weaken global demand.