The global economy is on high alert as the rapid escalation of military conflict in the Middle East threatens to trigger an unprecedented oil shock. The simultaneous paralysis across two of the planet's most critical maritime chokepoints (the Strait of Hormuz and the Bab el-Mandeb Strait) brings the energy market to the brink of total collapse, with analysts warning of prices that will shatter every historical record. Brent crude futures surged nearly 5%, approaching $98.70 per barrel, following renewed attacks by Yemen's Houthi rebels against two Saudi oil tankers in the Red Sea. This latest strike forced tankers to steer clear of the southern Red Sea once again, reversing the recovery of maritime navigation and adding a heavy war risk premium to global oil prices. At the same time, Hormuz remains partially blockaded. This combination places one-fifth of the world's crude oil supply passing through the Strait in immediate jeopardy, while threatening to disrupt or delay an additional 8 to 9 million barrels per day that normally transit through the Bab el-Mandeb Strait.
Nightmarish forecasts for oil above the 2008 record
Helima Croft, head of global commodity strategy at RBC Capital Markets, sounded the alarm, stressing that the war is entering an exceptionally dangerous phase. As she noted, despite the 30% surge in Brent prices since July 1, the market has not yet fully priced in the extreme strain that is accumulating across global supply chains. In the worst-case scenario of a full-scale regional war, oil prices are estimated to potentially surpass not only the 2022 highs of $128 (triggered by the war in Ukraine), but even the all-time historic high of $146 set in 2008. For its part, Goldman Sachs warns that Brent could spike above $120 by the fourth quarter if Strait of Hormuz disruptions persist.
The global market left without a "cushion"
What makes the current situation explosive is the fact that global oil inventories are already depleted, with stockpiles at Cushing in the US floating near "tank bottom" levels. Deprived of spare production capacity to absorb the supply shock, the market remains completely exposed to crude supply disruptions. At the same time, Saudi Arabia's contingency plans via the East-West pipeline (7 million barrels per day) are proving insufficient if the Bab el-Mandeb closes permanently. In such an event, tankers bound for Asia would be forced to reroute around Africa (Cape of Good Hope), skyrocketing freight rates and causing weeks of maritime transit delays. The crisis is now spilling into the US political arena, where the average price of regular gasoline has topped $4 per gallon. This development dramatically escalates pressure on the Trump administration to pursue a diplomatic solution in the Gulf, once US forces degrade Tehran's missile and drone capabilities threatening commercial maritime navigation.
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