Brent crude oil breaks through $108; Bernstein warns: With the Hormuz and Red Sea crises overlapping, oil prices may surge to $150.

Brent crude oil breaks through $108; Bernstein warns: With the Hormuz and Red Sea crises overlapping, oil prices may surge to $150.

The simultaneous attacks on Saudi Arabia's East-West oil pipeline and the postponement of diplomatic negotiations between Iran and Gulf states have created the most severe supply pressure on the global energy market in decades. Bernstein analysts warn that Brent crude oil prices could surge further to $120 to $150 per barrel from current levels.

Brent crude futures rose as much as 3.7% overnight, touching above $108 a barrel, before retreating slightly to $107.70; WTI futures were around $103. According to a previous Xinhua report, the regional meeting originally scheduled for the 14th in the southern Omani city of Salalah has been postponed. Omani Foreign Minister Badr Albusaidi stated on social media Sunday evening that the postponement was "to seek consensus," and reiterated the commitment of all parties to promoting regional dialogue and cooperation.

In their latest report, Bernstein analysts Neil Beveridge and Brian Ho characterized the current market as experiencing a "long-term supply shortage," noting that their previous 2026 Brent crude forecast of $90 per barrel had been "exceeded by reality." Meanwhile, U.S. Energy Secretary Chris Wright poured cold water on the market in Vienna, stating that "expecting a mutually agreeable agreement with Iran at this time is clearly unwise," and warning traders not to have any expectations for a diplomatic breakthrough on the Strait of Hormuz issue.

4% of global supply remains unresolved

Saudi Arabia's East-West oil pipeline was damaged in a drone attack last Thursday, prompting Riyadh to shut it down. The pipeline, with a daily capacity of 7 million barrels, is a key route for Saudi oil exports, bypassing the Strait of Hormuz since the start of the Iran-Iraq War.

According to Reuters, citing multiple Saudi oil traders, Saudi Arabia will deplete its reserves for Red Sea exports if the pipeline cannot be restored to operation in time. Three industry sources familiar with Saudi exports stated that current inventories at Yanbu port can only sustain export demand for five to seven days; other sources indicated that Saudi inventories at the Egyptian ports of Ain Sokhna and Siddiqlil can only last for a few days. Industry estimates suggest that Yanbu port has a storage capacity of approximately 35 million barrels, while Ain Sokhna and Siddiqlil have approximately 18 million and 20 million barrels respectively, but neither is currently at full capacity.

Neither the Saudi government's media office nor the Ministry of Energy responded to inquiries regarding a timeline for pipeline repairs. According to Reuters sources, the repair time is estimated to range from several weeks to five or six weeks, with some sources suggesting that pumping could be partially restored during the repair process.

Data released by the International Energy Agency (IEA) last Friday showed that Saudi oil supplies fell to a more than 30-year low in August due to blockages in the Strait of Hormuz and the Red Sea passage. The IEA also predicted that global oil supplies would fall by about 5.7 million barrels per day this year, a decrease of about 6%.

Diplomatic deadlock: Hormuz negotiations postponed indefinitely

This summit was originally the first formal meeting between Iran, Gulf Cooperation Council member states, and Iraq since the United States and Israel launched their war against Iran in February of this year, with the focus on establishing a temporary shipping lane in the Strait of Hormuz.

The Iranian Foreign Ministry stated that Saudi Arabia requested a postponement of the regional summit, citing the situation in Yemen. The Iranian Foreign Ministry immediately countered, saying, "Saudi Arabia's request to postpone the regional summit and its attribution to the situation in Yemen is a diversion from the root cause of this crisis." An informed source revealed that Saudi Arabia's dissatisfaction stems in part from the continued attacks on its territory by the Iranian-backed Houthi rebels.

Bahrain has explicitly refused to participate in the meeting, citing recent attacks on the Gulf region by Iranian-backed militants. The summit was originally scheduled to discuss a proposal jointly put forward by Oman and Iran, which essentially granted Iran the power to decide which vessels could enter the Persian Gulf and potentially charge fees to passing ships.

Meanwhile, tensions in the Strait of Hormuz continue to escalate. The UK Maritime Trade Action Group (UKMTO) reported on Sunday that a vessel caught fire after being attacked by projectiles; Iranian state media IRIB reported that a commercial vessel was attacked by "enemy forces" near Qeshm and Hengam islands, resulting in one death.

Dual channels blocked: Supply gap continues to widen

According to Bloomberg data, the combined transit traffic through the Strait of Hormuz, the Bab el-Mandeb Strait, and the Suez Canal is now less than 7 million barrels per day, compared to about 20 million barrels per day before the conflict.

UBS energy expert Dominic Ellis pointed out that the impact of the East-West pipeline closure on Red Sea exports, coupled with the Houthi rebels' continued disruption of Red Sea shipping, will continue to support oil prices for the foreseeable future. He also stated that the UBS team earlier this month predicted that energy stocks' third-quarter earnings would have a 40% upside to market consensus, with refining-related stocks such as Repsol, Galp, and OMV seeing even higher upside potential of 80% to 90%.

According to CCTV, on September 14 local time, the Houthi rebels in Yemen claimed responsibility for attacking the airbase in Khamis Mushait, Saudi Arabia. The Houthis also seized an island at the entrance to the Red Sea last Friday, further exacerbating the uncertainty surrounding Red Sea shipping.

Another key factor that previously suppressed oil prices—a sharp decline in Chinese imports—is also reversing. Analysts point out that China's imports had previously decreased by about 5 million barrels per day, partly due to the use of an estimated 1.5 billion barrels of strategic petroleum reserves; imports are now beginning to rebound and are pushing up oil prices globally.

Significant upside risks to prices

Bernstein's warning clearly illustrates the severity of the current situation: the simultaneous superposition of three pressures—the obstruction of the Strait of Hormuz, disruptions to Red Sea shipping, and the closure of Saudi Arabia's East-West pipeline—is putting unprecedented pressure on the global oil supply system.

Chris Wright attempted to stabilize market expectations, stating that combined traffic through the Strait of Hormuz and bypass pipelines had recovered to more than two-thirds of pre-conflict levels, and that "the global oil market is more tense than we hoped, but not excessively so." However, with Saudi Arabia's inventory window narrowing to several days and diplomatic negotiations stalled, market pricing in supply disruptions will continue.

With only about 50 days left until the US midterm elections, the soaring oil prices are also putting significant political pressure on Trump's Republican Party.

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