International crude markets have been heating up steadily since the beginning of September. On September 8, Brent crude settled at $99.39 per barrel, accumulating a monthly gain of over 9%. By the time of writing on September 9, Brent crude futures had surged past the $100 per barrel mark for the first time since late July, while US WTI crude futures climbed to a high of $94.78 per barrel.
Escalating Middle East Conflict
The core driver behind this rally in oil prices stems from a sharp deterioration in Middle East geopolitical conditions. In early September, military confrontations between the US and Iran intensified once again. On September 8, US forces destroyed five Iranian oil tankers, following earlier ballistic missile launches by Iran's Islamic Revolutionary Guard Corps at US warships. In response, Iran mounted a counteroffensive, launching ballistic missiles at a US military base in Jordan on September 9, while also attacking multiple vessels near the Strait of Hormuz, further escalating regional tensions.
Meanwhile, Yemen's Houthi rebels launched strikes on September 8 targeting Saudi cities including Abha, Jazan, and Najran. Saudi Arabia's Energy Ministry issued a statement that same day, confirming multiple energy facilities in the southern part of the kingdom had been attacked, triggering fires in several locations and temporarily halting operations at some installations. Reports indicate the attacks left 73 people injured and affected energy infrastructure in areas such as Jazan.
At the same time, explosions were reported near Iran's Kharg Island, a critical oil export hub, as the US-Iran standoff intensified further. Crude shipments through the Strait of Hormuz have been severely disrupted, reigniting market concerns over this vital global energy chokepoint.
Divergent Views on Strait of Hormuz Flows
Currently, there is considerable disagreement in the market regarding actual crude flow volumes through the Strait of Hormuz. The US has previously stated that oil flows through the strait exceeded 17 million barrels per day in late August, while estimates from shipping data firm Kpler are significantly lower than that figure. Given that some tankers have switched off their automatic identification systems and ship-to-ship transfers have increased, actual flow volumes remain highly uncertain.
US Energy Secretary Wright has indicated that daily average crude flows through the Strait of Hormuz have surpassed 9 million barrels, and when combined with capacity from alternative pipelines bypassing the strait, total regional throughput has recovered to more than two-thirds of pre-conflict levels. However, the latest Kpler shipping data shows only six commodity vessels transited the Strait of Hormuz on September 8, notably lower than the average daily level from the prior ten days, suggesting shipping activity remains under significant pressure.
Market participants widely believe that if shipping security in the Middle East continues to deteriorate, crude supply chains could face even greater disruptions.
Tightening Supply and Demand Fundamentals
Beyond geopolitical risks, the fundamental supply-demand picture in international crude markets is also tightening. On the supply side, seven key OPEC+ producers—Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman—held a video conference on September 6, deciding to keep production quotas for October 2026 unchanged at September levels. The next OPEC+ meeting is scheduled for October 4. This marks the first time the alliance has opted to pause further output increases after several consecutive months of ramping up production. Prior to this, OPEC+ had raised production quotas for six straight months through September.
Despite the ongoing increases in production quotas, actual output from some members remains notably below target levels due to the impact of the Middle East conflict. This means that paper increases in production do not necessarily translate into new supplies actually reaching the market.
On the demand side, the International Energy Agency's (IEA) latest Oil Market Report, published in August, projects that global oil demand in 2026 will decline by 1.6 million barrels per day year-on-year, with the rate of decline widening compared to previous forecasts. The IEA believes that the sustained blockage of the Strait of Hormuz and high energy prices are suppressing oil consumption. However, the IEA expects global oil demand to resume growth in the fourth quarter of 2026 as supply disruptions ease. OPEC, for its part, has revised down its 2026 global oil demand growth forecast to approximately 580,000 barrels per day.
Slowing demand growth suggests that high prices are creating a degree of "self-limiting" mechanism, but in the near term, the Northern Hemisphere's peak driving season and refinery demand continue to provide support for oil prices.
On inventory levels, US Energy Information Administration (EIA) data shows that for the week ending August 28, US commercial crude inventories fell by approximately 4.5 million barrels to 424.5 million barrels, a decline significantly exceeding market expectations of around 1.1 million barrels. During the same period, US refinery utilization rates rose to 98%, the highest level since August 2018, while US crude exports also climbed to 4.5 million barrels per day. The combination of continued inventory drawdowns and geopolitical risks has further reinforced market expectations of tight supply.
The oil market is not entirely without a "cushion" at present. Non-OPEC producers including the US, Canada, and Guyana are ramping up output, providing some supplementary supply to the global market. Reuters analysis suggests that non-OPEC producers may add around 1.4 million barrels per day of new supply this year, while Gulf producers are also maintaining partial exports through alternative pipelines and other ports.
Further Upside Potential for Oil Prices
Regarding the future trajectory of oil prices, major financial institutions hold clearly divergent views, though recent forecasts have been notably revised upward. Goldman Sachs recently raised its December 2026 price forecasts for Brent crude and WTI crude by $5 to $85 and $80 per barrel, respectively. Meanwhile, Goldman Sachs warned that if Middle East shipping attacks escalate further, Brent crude could surge to $120 per barrel; if regional crude exports return to normal, prices could fall back to around $80. Goldman Sachs expects shipping disruptions to persist into 2027.
Morgan Stanley has also recently raised its oil price forecasts, projecting Brent crude to average around $90 per barrel in the third quarter of 2026, reaching a peak of nearly $100 per barrel in the fourth quarter. The bank believes that due to slower-than-expected recovery in Middle East supply, the market could remain in a supply deficit from the fourth quarter of 2026 through the first quarter of 2027. Martin Ratz, chief commodity strategist at Morgan Stanley, stated that tightening supply and declining buffer inventories are driving Brent prices back toward the $100 level.
The EIA, in contrast, remains relatively cautious. Its latest forecast shows Brent spot prices averaging around $85 per barrel in the third quarter of 2026. As most Middle East oil production is expected to gradually recover in early 2027, Brent prices are projected to ease back to an average of $69 per barrel at that time.
Among domestic institutions, CICC expects Brent crude price centers of $90 per barrel and $80 per barrel for the third and fourth quarters, respectively. Analysts point out that in the near term, Middle East geopolitical conflicts remain the core variable driving oil prices. If US-Iran military confrontations continue to escalate and the disruption of transits through the Strait of Hormuz persists, oil prices have room to probe higher. However, the suppressive effect of high prices on consumption is also becoming apparent on the demand side, which could limit further upside. Whether the $100 threshold can be firmly held will depend on whether the conflict continues to spill over and the pace of global supply recovery.