Analysts warn Hormuz stalemate could push oil to $120 a barrel

The prolonged standoff between the United States and Iran over control of the Strait of Hormuz is raising the prospect of oil prices surging to $120–$140 per barrel, analysts warn, as global fuel inventories deplete and the physical market approaches what some call a "tipping point."

Prices Ease but Fundamentals Tighten

Brent crude slipped to around $88–$89 a barrel on Thursday as a massive 17.4-million-barrel increase in U.S. commercial crude inventories and expectations of an extended U.S.-Iran ceasefire temporarily eased supply fears. But the relief may be short-lived. The International Energy Agency's August Oil Market Report, released Wednesday, projected a market deficit of 1.8 million barrels per day in the third quarter — a 1-million-barrel-per-day downward revision from its July forecast. Global oil supply is now forecast to fall by 4.3 million barrels per day in 2026, the IEA said.aa+3

Traffic through the Strait of Hormuz remains at two-month lows, with the waterway mostly closed since the U.S.-Iran conflict began on February 28. Saudi crude exports to the United States have dropped to zero, according to Transport Topics reporting. On Tuesday, President Donald Trump claimed the United States had "total control over the Hormuz Strait," while Iran insisted the waterway would remain shut unless Washington meets Tehran's conditions.rigzone+2

Analysts Point to a Q4 Crunch

Kieran Tompkins, senior climate and commodities economist at Capital Economics, told CNBC that "if the strait remains closed and oil inventories in OECD countries continue to be depleted quickly, the oil market could reach a tipping point around the start of Q4." He added: "This would be consistent with much higher prices, possibly in the region of $120–140 per barrel based on historical form."oilprice

Amrita Sen, founder of Energy Aspects, said on CNBC that "the crude set-up is more bullish on a fundamental basis." Meanwhile, Ole Hansen of Saxo Bank noted that the real squeeze is in refined products — diesel, gasoil, and jet fuel — where refining margins have reached record levels in the Atlantic Basin as Middle Eastern and Russian refinery disruptions persist.rigzone+1

Ceasefire Extension Offers Fragile Hope

Pakistani government sources told Anadolu Agency that the United States and Iran had "agreed" to extend the 60-day ceasefire under the Islamabad Accord, which expires August 17, though the duration of the extension remains under negotiation. OPEC lowered its 2026 global oil demand growth forecast to 580,000 barrels per day on Wednesday, while the IEA projected consumption would contract by 1.6 million barrels per day this year.sana+2

Until the strait reopens and production visibly recovers, as Saxo Bank's Hansen wrote, "volatility looks set to remain a defining feature" of global energy markets.oilprice