The Commodities Feed: Persian Gulf escalation pushes Brent above $90
Per the full note source, Brent crude has breached $90/bbl as Persian Gulf escalation disrupts vessel flows through the Strait of Hormuz, with only 2 outbound oil tankers transiting today. The desk argues that the risk of Bab el-Mandeb closure by Houthis, combined with the imminent end of US SPR releases, leaves the oil market vulnerable to further price spikes. While no FX pair is explicitly cited, the rally supports energy-linked currencies (CAD, NOK) and pressures import-heavy economies (JPY, INR). Consensus among bank strategists sees Brent averaging $85-95 in Q2, with upside risks skewed by geopolitical events.
What the desk is arguing
The desk frames the oil price surge as a direct consequence of Persian Gulf military escalation, with vessel flows through the Strait of Hormuz effectively halted. LSEG data shows only 2 outbound oil tankers and zero inbound traffic, returning flows to pre-MoU levels. The note highlights that Houthis have been instructed to shut the Bab el-Mandeb Strait if US attacks Iranian power infrastructure, which would force tankers via Suez, lengthening Saudi oil routes to Asia.
The supporting evidence includes the imminent cessation of US SPR releases around end-March, which have provided a buffer during the conflict. The desk notes that the 172m barrels released were structured as an exchange, requiring future repayment plus interest, limiting the government's willingness to tap further. The alternative read would be that SPR releases could resume, but the desk views this as insufficient to offset supply disruption risks.
The implicit rejection is that the market is underpricing tail risk of a wider blockade. The desk's thesis is that without de-escalation, Brent could sustain above $90 and test $100, as supply-side risk premiums expand.
How firms align with this view
Key takeaways
- 01Brent broke above $90/bbl as Persian Gulf escalation halts Strait of Hormuz vessel flows.
- 02Only 2 outbound oil tankers transited today; Bab el-Mandeb closure risk adds supply uncertainty.
- 03US SPR releases set to cease end-March, removing a key buffer for oil markets.
- 04Saudi Arabia's reliance on Bab el-Mandeb route makes its exports to Asia more vulnerable.
Market implications
Watch for sustained Brent above $95 as a catalyst for CAD and NOK strength, while JPY and INR face headwinds. The $90-100 range is the near-term risk zone; a clear de-escalation signal would collapse premiums.
Risks to this view
An immediate ceasefire or diplomatic breakthrough in the Persian Gulf would reverse price spikes. Additionally, a coordinated SPR release by the US and IEA members could cap upside. The desk notes Iran may avoid full blockade to retain market share, limiting disruption.
Articles The Commodities Feed: Persian Gulf escalation pushes Brent above $90 Published 03:09 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download With little sign of de-escalation in the Middle East, oil prices continue to move higher as vessel flows essentially grind to a halt Warren Patterson and Ewa Manthey Source: Shutterstock Energy - Speculators jump into oil amid renewed disruptions ICE Brent broke above US$90/bbl this morning with no let-up in the escalation in the Persian Gulf. The US and Iran continue to exchange strikes, which are proving to be deadly for both sides. If this escalation goes unchecked, we could return to an environment of wide-scale attacks across the Persian Gulf.
Vessel flows have essentially ground to a halt. LSEG data show that only 2 outbound visible oil tankers transited the Strait of Hormuz, with no inbound traffic. Flows are essentially back to where they were before the Memorandum of Understanding (MoU).
Meanwhile, reports are that Iran told the Houthis in Yemen to essentially shut the Bab el-Mandeb Strait if the US attacks Iranian power infrastructure. This strait is important for vessel movements through the Red Sea. The Saudis have relied heavily on this route since the war began to bypass the Strait of Hormuz.
If closure occurs, tankers would have to enter and exit the Red Sea via the Suez Canal. This would make Saudi oil exports to Asia a lengthier and costlier affair. The issue for the oil market is that SPR releases, which have offered some relief during the war, are set to cease around the end of this month.
This leaves the market relatively more vulnerable. Clearly, there’s always the potential for SPRs to be tapped further. The US may be willing to do so, given that the 172m barrels it's in the process of releasing are structured as an exchange rather than a pure release.
So, these barrels will be returned to the SPR plus interest in the form of additional supply. Given the market moves in recent weeks, it’s unsurprising to see speculators increase their net long in ICE Brent. They bought 114,752 lots over the last reporting week, leaving them with a net long of 169,839 lots as of last Tuesday.
The move was driven predominantly by fresh longs entering the market. Meanwhile, speculators also increased their net long in ICE gasoil by 2,389 lots over the week to 71,875 lots. Given the recent move in the gasoil market, it's surprising that we have not seen more aggressive speculative buying, though this may be more evident in the next Commitment of Traders report.
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