Hormuz is reopening, so why are oil prices still racing towards $100?

Oil prices rose on Friday, keeping Brent above $96 a barrel and WTI above $92 as renewed US-Iran fighting outweighed signs that Washington was managing to keep more crude moving through the Strait of Hormuz.

Brent crude gained 0.6% to $96.06 a barrel in Asian trading, while West Texas Intermediate rose 0.9% to $92.10.

Both benchmarks were heading for their strongest weekly gains since mid-July, with Brent up 7.6% and WTI 10.4%. The rally shows how quickly geopolitical risk has returned despite efforts to stabilise Gulf shipping.

Hormuz escorts ease the immediate supply scare

The biggest source of reassurance came from the Strait of Hormuz, where the US military escorted 40 commercial vessels carrying about 18 million barrels of oil through the waterway on Tuesday.

That was the highest daily volume moved through the strait since the conflict began.

US forces also intercepted missiles and drones during the operation. The escort suggests Washington can keep at least part of the route functioning during heavy military activity, reducing the risk of a sudden collapse in Gulf exports.

But the improvement is fragile. Before the conflict, roughly 20 million barrels a day moved through Hormuz, while the US Energy Information Administration estimated flows averaged just 4.9 million barrels a day in the second quarter as the war disrupted shipping.

ANZ Research analysts, cited by The Wall Street Journal, said renewed Iranian attacks on US bases in Kuwait and the United Arab Emirates risk undermining the recovery in Hormuz traffic.

That leaves a sizeable geopolitical premium embedded in both Brent and WTI.

War risk keeps Brent supported near $100

Fresh US strikes on Iran this week marked the sharpest escalation since July, while Israeli threats against Iranian infrastructure have kept traders alert to the possibility of damage to energy facilities.

Capital Economics, cited by The Wall Street Journal, expects Brent to reach $100 a barrel by year-end before easing towards $70 by the end of 2027.

The forecast reflects elevated near-term supply risks even if the market eventually normalises.

US inventories are also offering support. Commercial crude stocks fell to 424.5 million barrels in the week ended August 28, down about 4.5 million barrels from the previous week, according to the EIA.

Some analysts still see room for prices to retreat if shipping flows continue improving.

Julius Baer strategist Norbert Rücker told Barron’s that stronger-than-feared global inventories and better Hormuz traffic could pull oil back into the $70s during 2026.

Diesel crunch adds another layer of pressure

The crude market is only part of the supply story. US diesel prices reached a record $5.820 a gallon on Thursday surpassing the previous high set in June 2022.

The spike reflects a tightening global products market as Ukrainian attacks disrupt Russian refineries and Middle East instability strains supply routes.

Low distillate stocks have left the market vulnerable heading into the Northern Hemisphere harvest and winter heating season.

That keeps inflation risks elevated even if crude prices stop rising.