13MAY

Oil above $104 as war enters week three

4 min read

20:00UTC

Brent crude futures pushed past $105 on Monday, settling into the war's highest sustained range as the market prices in a Hormuz closure measured in weeks, not days.

← Back to 800 drones, three ceasefires, one cliff Jump to analysis ↓

ConflictDeveloping

Key takeaway

Sustained $100+ Brent reflects a duration-priced risk premium with no pipeline bypass if Hormuz closes.

Brent Crude closed Friday at $103.14. Monday futures opened higher: $104.89–$106.44 — the war's highest sustained trading range ¹.

The pattern has changed. In the war's first ten days, oil moved in violent swings: Brent hit $119.50 on 8 March before falling $30 in a single session on Trump's "very soon" language and profit-taking . The IEA's record 400-million-barrel strategic reserve release — the largest in the agency's 50-year history — failed to hold prices below $100 for even a day . Brent crossed $100 on a closing basis on 13 March and has not fallen below it since. The spike-and-crash phase is over. What remains is structural repricing: the market has concluded the strait of Hormuz will stay effectively closed for weeks, with daily transits in single digits against a pre-war average of 138 and no country committing warships to reopen it.

At $104–106, the economic damage compounds daily. Import-dependent economies — most of Europe, Japan, South Korea, India — face direct energy cost increases and secondary inflation through transport, manufacturing, and food production. Deutsche Bank and Oxford Economics published recession and stagflation warnings for the second and third quarters of 2026 . US petrol has reached $3.63 per gallon nationally.

The policy response has produced its own contradictions. Trump's 30-day waiver on Russian oil sanctions, intended to ease prices, drew opposition from six of seven G7 members. Zelenskyy estimated the waiver could channel $10 billion to Moscow ². If Ukrainian intelligence is correct that Russia is manufacturing Shahed drones at Alabuga in Tatarstan and shipping finished units back to Iran ³, the chain runs in a circle: the US eases sanctions on Russia to offset oil prices driven up by the US war on Iran, while Russia uses the revenue to arm Iran against US forces.

Deep Analysis

In plain English

Oil prices above $100 per barrel affect everyday life in ways that compound over time. Petrol and diesel rise at the pump within days. Freight costs increase, raising prices on most goods within weeks. Airlines face fuel bills that eventually appear in ticket prices. What makes this situation structurally different from past Middle East oil shocks is geography. A fifth of the world's daily oil supply passes through the Strait of Hormuz — a narrow waterway that Iran could threaten or close. Unlike the Russian supply disruption of 2022, there is no pipeline network capable of rerouting Hormuz-scale volumes. Markets are not pricing in a disruption that has already occurred. They are pricing the risk that one could begin at any moment while this conflict continues.

Deep Analysis

Synthesis

Elevated oil prices create a self-reinforcing dynamic that is visible only across the full narrative. Brent above $100 increases Russian hydrocarbon export revenue, partially freed by Trump's 30-day sanctions waiver. Per Ukrainian intelligence, that revenue funds continued Shahed drone production at Alabuga for transfer to Iran. Iran deploys those drones against Israel, sustaining the conflict. The sustained conflict sustains the Hormuz risk premium. The war's economic output is partially recycling into its own perpetuation — a feedback loop distinct from any single event and not addressed in the body.

Root Causes

Three structural factors underpin the price level beyond the immediate conflict. OPEC+ — led by Saudi Arabia and the UAE — has not signalled emergency output increases to absorb the Hormuz risk premium, reflecting their own calculations about preserving price floors. US shale producers require $60–70 per barrel to justify significant capacity expansion, meaning new supply emerges only after an 18–24 month drilling and completion lag. Strategic petroleum reserve releases by the US and IEA members can dampen short spikes but cannot substitute for Hormuz volumes in a sustained closure scenario — the reserve tool is designed for disruption, not prolonged threat.

Escalation

Monday futures at $104.89–$106.44 represent a sustained range rather than a spike — markets have repriced the baseline, not reacted to a single event. Sustained ranges are structurally more damaging than equivalent spikes because they reprice long-term supply contracts, shift central bank inflation forecasts, and alter capital investment decisions in energy and manufacturing. The IDF's declared six-week-plus planning horizon removes any near-term catalyst to compress the risk premium.

What could happen next?

2 consequence2 risk1 opportunity1 precedent

Consequence
G7 retail petrol and diesel prices will rise an estimated 8–12% within two weeks at current Brent levels, directly increasing household transport costs.
Immediate · Assessed
Risk
Central banks facing inflation overshoot from sustained $100+ oil will delay planned rate cuts, tightening credit conditions during an already elevated geopolitical risk environment.
Short term · Assessed
Consequence
European energy-intensive manufacturers face margin compression that may trigger production curtailments and layoffs if Brent remains above $100 beyond 60 days.
Medium term · Suggested
Risk
Emerging market economies with dollar-denominated oil imports and weak currencies — Pakistan, Egypt, Sri Lanka — face acute balance-of-payments stress at current price levels.
Short term · Assessed
Opportunity
US shale producers and LNG exporters benefit materially from elevated prices; domestic US energy production expansion partially offsets allied import cost pressures over an 18–24 month horizon.
Medium term · Suggested
Precedent
Sustained $100+ oil driven by a non-Gulf conflict will accelerate energy transition investment decisions in Europe and Asia, compressing long-run hydrocarbon demand over a decade.
Long term · Suggested

Source Landscape

This story draws on neutral-leaning sources from Israel

Israel

Primary parallel: The 1990 Gulf War drove Brent from $16 to $46 per barrel — a near-tripling — before collapsing within weeks once the conflict's brevity became clear, establishing that price trajectory in Middle East conflicts is ultimately duration-dependent rather than disruption-magnitude-dependent.

Counter-parallel: Iran's September 2019 drone strikes on Saudi Abqaiq and Khurais destroyed 5% of global daily supply yet spiked Brent only 15% before full recovery within a fortnight — demonstrating that actual supply disruption recovers faster than a sustained risk premium from ongoing open-ended conflict.

Why it’s relevant now

IDF Brig. Gen. Defrin's publicly stated six-week-plus planning horizon directly signals to energy markets that this is not a short conflict. That signal sustains the risk premium structurally — the key variable distinguishing this from past Gulf shocks that resolved quickly.

Aviation fuel (Jet A-1) tracks Brent with a two-to-four-week lag. Airlines holding Q2 2026 hedge contracts priced at $85–90 per barrel face 15–20% unhedged cost exposure in Q3 if Brent remains above $100 — a cost increase likely to appear in ticket prices from June onwards.

European energy-intensive manufacturing — steel, chemicals, aluminium smelting — operates on margins that compress to near-zero above $95 per barrel oil-equivalent energy input costs. German industrial output data from Destatis already showed contraction in February before the current price level was reached, suggesting the sector entered this period with no buffer. VLCC tanker day rates have risen 35–45% since 28 February per Baltic Exchange data, reflecting Hormuz risk premium and longer rerouting voyages — compounding the headline Brent effect for net oil-importing nations through higher cargo costs that are separate from the commodity price itself.

Consensus view: The Oxford Institute for Energy Studies has modelled that a partial Hormuz disruption lasting 30 days adds $15–25 per barrel to Brent; a full closure sustained beyond 60 days would push prices above $130, crossing thresholds historically associated with global recession onset.

Counter-view: The Gulf Research Centre in Riyadh has noted that Saudi Arabia and the UAE operate East–West pipelines capable of handling approximately 7 million barrels per day — roughly 40% of normal Hormuz throughput — giving Gulf producers both the means and the strong financial incentive to partially offset a closure, capping the most extreme price scenario.

Key tension: Whether Iran would execute a full Hormuz closure — simultaneously destroying its own remaining oil export revenue — or use the threat as a coercive instrument; the distinction is economically critical but operationally unpredictable.

First Reported In

Update #37 · Six more weeks of strikes; Hormuz deal dead

FX Leaders· 16 Mar 2026

Read original →

Causes and effects

Caused by

Brent holds above $103 for second day

Brent's Friday close at $103.14 led to Monday futures at $104.89–106.44, the war's highest sustained range

Occurred 14 Mar 2026

Read story →

This Event

Oil above $104 as war enters week three

Oil has shifted from panic spikes to a sustained range above $100, reflecting the market's structural assessment that the Hormuz closure will last weeks. Deutsche Bank and Oxford Economics have issued recession and stagflation warnings for Q2-Q3 2026.

Led to

Brent breaks $106, 50% above pre-war

Brent crude rose from Friday's $103.14 close to $106.18 Monday, driven by continued physical supply destruction including Shah gas field and Fujairah shutdowns.

Occurred 15 Mar 2026

Read story →

Different Perspectives

NATO eastern flank (B9 + Nordics)

The B9+Nordic Bucharest joint statement on 13 May reaffirmed Ukraine's sovereignty within internationally recognised borders and backed NATO eastern flank reinforcement; the summit accepted Zelenskyy's bilateral drone deal proposal as a structural alternative to the stalled US export approval pathway, treating it as a European defence architecture question rather than aid delivery.

IAEA / Rafael Grossi

Grossi is still negotiating a sixth ZNPP repair ceasefire with no agreement after 50 days of 750 kV line disconnection; the 3 May ERCL drone strike that destroyed environmental monitoring equipment represents a qualitative escalation in infrastructure degradation that the IAEA has documented but cannot compel either party to halt.

Péter Magyar / Hungary

Magyar's incoming foreign minister pledged on 12 May that Hungary will stop abusing EU veto rights; the pledge is a statement of intent rather than a binding legal commitment, and Magyar's MEPs voted against the €90 billion loan as recently as April, while a planned referendum on Ukraine's EU accession preserves a downstream blocking lever.

EU Council and European Commission

The Magyar cabinet formation on 12 May removes the Hungary veto that had blocked the €9.1 billion first tranche since February; the Commission is now coordinating the three-document disbursement package for an early-June vote. The structural blocker is gone; the disbursement question is now scheduling, not politics.

Donald Trump / White House

Trump announced a 9-11 May three-day ceasefire with a 1,000-for-1,000 prisoner exchange attached, then called peace 'getting very close' on 11-13 May while Russia's 800-drone barrage was under way; his public framing adopted Russian diplomatic language without securing any Russian operational concession or verifying the exchange was agreed.

Vladimir Putin / Kremlin

Putin told reporters on 9 May the war is 'coming to an end' while Peskov confirmed on 13 May that territorial demands are unchanged and Russia requires full Ukrainian withdrawal from all four annexed regions; the verbal accommodation costs Moscow nothing and conditions any summit on a pre-finalised treaty Kyiv cannot accept.