Brent crude is trading near $97 a barrel, closing in on $100 as Middle East tensions escalate. The US has abandoned diplomacy with Iran, opting for military strikes, sanctions, and a blockade that halts Iranian imports and exports. Meanwhile, Iran's security chief has floated a new exclusion zone that could tighten shipping even further.
Oil's march toward $100
Brent rose towards $98 a barrel Monday, its highest level since late July, following weekend US strikes on three Iranian tankers. A separate attack hit Saudi Aramco, the Saudi state oil company, in Jizan. Goldman Sachs warns oil could hit $120 if shipping attacks broaden and intensify, according to Daan Struyven, co-head of global commodities research. The bank first flagged a possible return to $120 in July, months before the current price spike.
Iran's new strategy
Iran's Supreme Leader Mojtaba Khamenei has stayed in hiding for six months. Mohsen Rezaei, head of Iran's Supreme National Security Council, said Iran needs a new strategy and floated an exclusion zone across the Persian Gulf and Gulf of Oman, expanding restrictions beyond the Strait of Hormuz. That would go further than the current blockade. Iran and Oman are negotiating a temporary route, reviving Hormuz corridor talks that briefly cooled oil last month.
The supply crunch
Oil inventories outside China have fallen sharply, down more than 400 million barrels since the war began, according to Energy Aspects. Commodity funds are turning bullish as reserves near a tipping point. Diesel prices have climbed to record highs, trading more than $100 a barrel above crude in the US, signaling the crunch is already here.
The risk of miscalculation
Hamidreza Azizi, an Iran analyst at the International Crisis Group, said Tehran likely wants calibrated escalation, not full-scale war, and that miscalculation is the biggest risk of a wider war. The immediate question is whether Brent breaks $100, and whether the Iran-Oman corridor talks produce a temporary route before the exclusion zone becomes reality.
