Oil Breaks $100—and This Rally Has Legs

For months, crude oil prices have been held in check due to reports of improved tanker traffic through the Strait of Hormuz. However, this changed recently with the escalation of fighting between U.S. and Iranian forces. Brent crude surged above $100 per barrel for the first time since late July, as concerns about oil flows from the region intensified.

Reports of recovering crude oil flows out of the Persian Gulf kept prices relatively stable, with average daily outflows in early August ranging from 6 to 8 million barrels. Once fighting resumed, daily flows dropped below 2 million barrels, according to Rystad Energy. No large crude carriers have exited the strait since September 2, and the situation has escalated further with the U.S. destroying five Iranian tankers and Iran attacking a U.S. base in Jordan.

Despite this, Brent crude has continued to rise and has now broken above the $100 per barrel mark, with other international oil benchmarks also surpassing this figure. While the war in the Middle East continues, inventories are being drawn upon to support prices, but this finite resource will eventually run out, leading to further price increases.