Fear is back in the oil market – and with it the $100 scenario

Crude oil prices closed at their highest levels in nearly four weeks on Wednesday, continuing their upward trajectory as investors weigh the escalation of tension in the Middle East and the ongoing disruption of shipping in the Strait of Hormuz.

Brent crude futures settled at $91.62 a barrel , up 60 cents, or 0.7%. U.S. West Texas Intermediate gained 89 cents, or 1.1%, to $85.83 a barrel . Both benchmarks closed at their highest levels since July 24 .

The catalyst for the rise was the decision by the United Arab Emirates to suspend all financial and economic transactions with Iran in response to the recent missile attacks. “Crude futures continue to be supported by geopolitical tensions in the Middle East, now with the UAE announcing that it has severed all financial ties with Iran,” said Dennis Kiesler , senior vice president of trading at BOK Financial.

The focus of the market, however, remains the Strait of Hormuz . Before the start of the US-Israeli war with Iran in late February, about a fifth of the world’s oil and liquefied natural gas supplies passed through this seaway.

Today the picture is dramatically different. According to Kpler data, just six cargo ships transited the Straits on Tuesday, compared to nine the previous day and a daily average of eleven ships over the previous ten days.

The two sides have been giving conflicting accounts of the situation. US President Donald Trump said on Tuesday that no talks were underway with Iran and that the Straits were open . Tehran countered that the crucial waterway remained closed .

The diplomatic deadlock has worsened since the temporary ceasefire agreement expired on Monday. A senior Iranian official told Reuters that his country was moving towards escalation, while on Tuesday there were no reports of new strikes from either side. Meanwhile, according to the Financial Times , Tehran is considering military targets in Europe in case Trump further escalates the war.

Brent’s move above $91 shows that traders are now pricing in a higher geopolitical risk premium , according to Ahmad Asiri , a strategist at Pepperstone. He said the move could pave the way for a return to triple-digit levels , bringing the $100 Brent scenario back into the spotlight.

Additional support for prices is coming from the Russian front. Oil exports from western Russian ports fell to about 2.3 million barrels per day in the first half of August, 15% below initial loading plans, due to problems at the Black Sea port of Novorossiysk .

The only major drag on the day was on the downside. According to the US Energy Information Administration ( EIA ), US crude inventories rose by 4.4 million barrels last week to 428.8 million barrels, easing concerns about supply constraints — but without halting the upward momentum.

Globally, refiners continue to buy large quantities of crude, taking advantage of high refining margins , while Ukrainian attacks on the Russian refining industry keep global fuel supplies tight, according to Kiesler.