Oil Price Could Surge to US$150 as Middle East Supply Risks Intensify
Middle East conflict puts global oil supply under pressure
Global oil markets are facing renewed supply concerns as escalating conflict threatens key energy routes across the Middle East. The Strait of Hormuz, the Red Sea and parts of Saudi Arabia have become increasingly exposed to disruptions, raising concerns about the availability of crude and refined products.
The latest escalation follows attacks on Saudi Arabia's East-West pipeline, an important alternative route for transporting oil while the Strait of Hormuz remains disrupted. The pipeline had helped reduce concerns about a broader global supply shortage by allowing some shipments to bypass the strategic waterway.
Key shipping routes face growing disruption
The Strait of Hormuz remains particularly important to global energy markets, carrying roughly 20% of the world's oil supply. At the same time, Iran-aligned Houthi forces have expanded their presence around Yemen and captured Perim Island near the entrance to the Red Sea.
Another vessel was also struck in the Strait of Hormuz, forcing its crew to evacuate after a fire broke out. These developments have increased uncertainty around the movement of oil tankers through two major international shipping routes.
The attacks on Saudi infrastructure have added another layer of pressure. The East-West pipeline can transport up to 4 million barrels of crude a day, providing an alternative export route around Hormuz.
Oil prices move sharply higher
The growing supply risks have already been reflected in crude markets. Brent crude moved above US$107 per barrel, while US West Texas Intermediate reached around US$103.
Australia's regional benchmark, Tapis crude, climbed to approximately US$110 per barrel, up 46% since July. Since Tapis influences wholesale fuel prices in Australia, the increase could place further pressure on motorists.
The national average price of unleaded petrol has already reached $2.19 per litre, while diesel has risen to $2.68, according to the source material.
Global inventories could become the next pressure point
The bigger concern for markets is how long existing oil inventories can absorb disrupted supply. Commonwealth Bank's lead mining and energy commodities strategist Vivek Dhar said the closure of the East-West pipeline has materially changed the amount of oil that needs to move through the Strait of Hormuz to keep global inventories stable.
Dhar estimates global oil and refined-product inventories could reach critically low levels within five to 11 weeks under a more severe scenario.
If inventories are depleted, Brent crude could potentially rise towards US$150 per barrel, according to Dhar, as higher prices would be required to force demand destruction in emerging Asian economies.
Higher fuel costs could add to inflation pressure
A sustained rise in crude prices would extend beyond the energy market. Higher oil costs can feed through to petrol, diesel, transportation and other business expenses, potentially adding to existing cost-of-living pressures.
For Australian households, the immediate impact is likely to be felt at the fuel pump. NRMA spokesperson Peter Khoury said petrol prices were likely to continue rising, although prices could fall relatively quickly if tensions in the Middle East ease.
The broader economic impact will depend heavily on the duration and scale of supply disruptions.
What investors should watch next
Investors will be watching developments around the Strait of Hormuz, the Red Sea and Saudi oil infrastructure, alongside movements in global inventories and crude prices. Refinery operations, tanker traffic and any further attacks on energy infrastructure will also remain important signals.
For now, the combination of disrupted supply routes, falling inventory buffers and elevated geopolitical risk has increased uncertainty across global energy markets.
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