Why has oil stayed below $100 a barrel despite supply disruptions amid US-Iran escalation?

Oil prices have remained below $100 per barrel despite recent disruptions in Middle Eastern exports caused by the US-Iran conflict. Despite a rally in global crude prices this month, Brent crude and other major benchmarks have yet to reach $100 a barrel. The US-Iran escalation has led to reduced Gulf oil exports, with flows through the Strait of Hormuz falling to below 2 million barrels per day (bpd) as of September.

However, alternative routes for Gulf producers have mitigated some of the earlier shortfall. Saudi Aramco resumed loading from its Ras Tanura port, while Iraq and the UAE have increased their exports. Non-Opec producers, including the US, Canada, and Guyana, are expected to increase output by a combined 1.4 million bpd this year, helping to partially fill the supply gap.

However, demand destruction in petrochemicals and transportation fuels remains significant, with China accounting for more than half of the decline due to rising transport electrification and coal-based chemicals. Physical markets suggest extremely tight supplies, with spot premiums for Dubai and Oman cargoes rebounding to April levels.

Several major banks have raised their Brent price forecasts, expecting prices to average $100 a barrel in the fourth quarter due to persistent Middle East shipping disruptions and rising diesel demand.