Brent crude tops $100 as US-Iran conflict expands and EIA raises 2026 energy price forecasts

Crude prices breach triple digits

Benchmark Brent crude oil futures rose past $100 a barrel on Wednesday, reaching $100.07 during European trading hours and marking a six-week high. U.S. West Texas Intermediate crude climbed 1.83% to $94.73 a barrel. The price of Brent crude has gained roughly 25% since early August as the conflict between the United States and Iran entered its seventh month. Commercial flows through the Strait of Hormuz, which averaged between 8 million and 9 million barrels per day before August 30, dropped below 2 million barrels per day. Financial institutions including Goldman Sachs, Bank of America and HSBC raised their price targets in response to the tightening physical market.

Oil investors are expressing their view about the impact of the latest bout of escalation in the Middle East in an unambiguous way.

Escalating strikes and Hormuz disruptions

The price increase follows direct military engagements across the Persian Gulf and Red Sea shipping routes. Iran announced on Wednesday that its forces attacked 10 vessels near the Strait of Hormuz after the United States sank five Iranian oil tankers. Iranian forces also launched strikes against U.S. military bases, while Iran-backed Houthi militants hit energy installations in Saudi Arabia, setting multiple oil facilities on fire. The Houthi attacks disrupted tanker traffic through the Bab el-Mandeb strait and reduced ship departures from Saudi Arabia's Red Sea port of Yanbu, curtailing key alternative routes for crude exports.

EIA outlook and global supply deficits

The U.S. Energy Information Administration raised its 2026 oil price projections on Wednesday, citing rapid inventory drawdowns caused by Middle Eastern production shut-ins. Global oil inventories have fallen by approximately 400 million barrels since January, with drawdowns expected to continue through the end of 2026. The EIA raised its 2026 spot price projection for Brent crude by nearly 5% to approximately $91 a barrel, while lifting its West Texas Intermediate forecast to $84.65 a barrel.

Middle East oil output shut-ins increased from 5 million barrels per day in July to 6.7 million barrels per day in August, according to the EIA. The agency projects regional outages to average 5.7 million barrels per day during the fourth quarter, with output not expected to return to pre-conflict levels until the second quarter of 2027. The International Energy Agency previously estimated that global crude supply will contract by 4.3 million barrels per day in 2026, representing a 4% decline.

Global economic and policy responses

Governments worldwide are altering fiscal policies and fuel strategies to manage energy costs. In Brazil, President Luiz Inacio Lula da Silva signed an executive decree allocating 6.6 billion reais ($1.3 billion) in fuel subsidies, providing 5.6 billion reais for road diesel and 998 million reais for petroleum imports and production. In India, the world's third-largest oil importer, Prime Minister's Office adviser Tarun Kapoor stated that the government is testing biofuel blends in diesel and expanding ethanol production from corn, rice and sugarcane. Central banks are preparing further policy tightening, with CME FedWatch data pricing a 60.4% probability of a 25-basis-point interest rate increase by the U.S. Federal Reserve next week.

Higher oil and rates remain the main risks to equities in the near term. It is well understood now that strategic reserves have been drawn down substantially to cushion oil prices.