Oil is reaching levels markets haven’t seen in years. Brent crude, the global benchmark for oil prices, has climbed to almost $100 a barrel as escalations continue in the Middle East, disrupting one of the world’s most important energy chokepoints. Goldman Sachs has cautiously warned that $100 may not be the ceiling, and that pessimists believe oil could climb toward $120 a barrel, with no haircut planned.
The main factor is the Strait of Hormuz, between Iran and Oman, a waterway that connects multiple oil-producing countries in the Persian Gulf to global markets. Before the conflict began in January 2025, almost 22 million barrels of oil and petroleum passed through the strait each day. By the second quarter of 2026, when the war began, that number had dropped to 4.9 million barrels a day (EIA). For a global economy that relies on reliable oil transport, that is an incredible disruption.
And the situation has not improved as it has continued, now that attacks have expanded past Hormuz. Houthi attacks on energy facilities in Saudi Arabia, coupled with disruptions in the Red Sea, have put pressure on alternative routes that producers were reliant on to move oil around the Strait. Currently, Brent sits at around $98 a barrel during Tuesday, September 8th’s trading session.
Why Hasn’t It Happened Yet?
The rational digestor of markets is asking, “Why hasn’t oil already climbed above $100?” and that is a very fair point. It’s reasonable to expect that oil prices would be significantly higher; however, the rest of the world has helped fill the void. Many producers have redirected shipments through different pipelines and ports, with the US, Canada, and Guyana expecting to add a combined 1.5 million barrels a day of production this year (Reuters). Weaker global demand for oil, particularly in China, has also helped prevent the shortage from pushing prices higher.
What Does $120 Mean for Markets?
A move toward $120 a barrel in the near term would have serious consequences beyond energy markets. Whether it’s due to escalation from the war, rising demand, or another factor, our world’s economy is embedded in oil, from transportation to agriculture to manufacturing. Higher oil prices eventually bleed into higher gas prices, diesel costs, and production costs.
Investors are particularly concerned with inflation. Rising energy prices can push consumer prices up as well, just when Warsh and his team are focused on keeping inflation under control. For now, $120 oil remains a downside scenario rather than the base case. But with Brent already flirting with $100 and two of the world’s most important oil shipping routes under pressure, the possibility is becoming increasingly difficult for markets to ignore.
