Oil nears $89 as Iran refuses to reopen Strait of Hormuz

Crude oil prices climbed for a sixth consecutive session on Tuesday as analysts warned that a prolonged closure of the Strait of Hormuz could push Brent crude to between $120 and $140 per barrel by the start of the fourth quarter.

Brent crude settled at $88.91 per barrel on Tuesday, up 1.4%, while West Texas Intermediate closed at $83.20, according to Reuters. The rally came after Iran declared it would not reopen the strait until undisclosed conditions were met, dashing hopes for a swift resolution to the five-month conflict between the United States and Tehran.hellenicshippingnews+1

A Market Nearing Its Tipping Point

"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," an analyst told CNBC. "This would be consistent with much higher prices, possibly in the region of $120-140 per barrel based on historical form."cnbc

Goldman Sachs The Goldman Sachs Group, Inc. ↗ 0.27% warned in July that in an upside scenario where Hormuz remains disrupted through 2027, Brent could top $130 in late 2026. MarketWatch reported that Goldman analysts led by Daan Struyven wrote that Brent may surpass $120 a barrel by Q4 if tensions do not start to ease.marketwatch+1

Wood Mackenzie has said that in a worst-case scenario of prolonged closure, Brent could approach $200 per barrel by year-end, though its base case assumes the strait reopens and prices trend lower over the next 18 months.woodmac+1

Reserves Under Strain

According to JPMorgan ↗ 0.87%, the market lost approximately 1.9 billion barrels of crude between March and July, or 12.6 million barrels per day. The International Energy Agency pledged in March to release 400 million barrels from member nations' strategic reserves, but drawdowns have been steep. The U.S. Strategic Petroleum Reserve fell to around 319.5 million barrels by early July, a level not seen in decades.nacion+1

J.P. Morgan Global Research forecasts Brent to average $86 per barrel in Q3 2026 and $80 in Q4, while the U.S. Energy Information Administration's August outlook projects an average of $85 per barrel for Q3.jpmorgan+1

Refined Products Feel the Squeeze

The pressure is particularly acute in refined products. Diesel prices on wholesale markets have doubled since February, while gasoline has risen 50%, according to Jim Burkhard of S&P Global ↗ 0.35%, who told AFP there is "not enough refining capacity" globally to compensate for facilities destroyed in the conflict. Ukrainian strikes on Russian refineries have compounded the shortage, disabling roughly a third of Russia's refining capacity.nacion

Bob McNally, president of Rapidan Energy Group, has called the Hormuz closure "the largest disruption in history" of the oil market, noting it has trapped spare production capacity inside the conflict zone. Whether the conflict resolves before inventories reach critical levels remains the central question hanging over global energy markets heading into autumn.nacion