Prepare for crude prices above $100

The world is not running out of oil. But if the Strait of Hormuz does not return to normal, inventories, bypass pipelines, and alternative supplies cannot indefinitely prevent a logistics crisis from becoming a global supply shock.Brent crude was trading at $90.46 a barrel on Tuesday and and West Texas Intermediate at around $82.43. Murban crude, closely watched in Asian trade, was at approximately $101.40. Benchmarks differ, but the message is clear: the oil market is entering a more dangerous phase.It is no longer reacting only to missiles, diplomatic statements, or sanctions announcements. It is beginning to price a harder question: can enough crude be loaded, insured, financed, transported, and delivered to refineries if the Strait of Hormuz remains seriously impaired for another four to six weeks?Alternative barrels exist in the Americas, West Africa, and the North Sea, and Gulf producers have bypass routes. But alternatives cannot make Hormuz dispensable. Before the conflict, roughly 21 million barrels a day of crude oil and petroleum liquids moved through Hormuz. The U.S. Energy Information Administration estimates flows fell from 21.6 million barrels a day in the fourth quarter of 2025 to only 4.9 million barrels a day in the second quarter of 2026.The problem is not whether oil exists somewhere. It is whether the right barrels can reach the right refineries, in sufficient quantity, at tolerable delivered cost and quickly enough.From war premium to delivery premiumOil markets can live with geopolitical tension when shipping continues normally and traders believe disruption will be temporary. They become far less forgiving when tanker movements are uncertain, marine insurance becomes expensive, cargoes are delayed, and refiners begin competing for replacement grades.Hormuz is, therefore, much more than a line on a map. It is the principal maritime outlet for much of the Gulf’s crude oil and LNG. Saudi Arabia and the UAE have pipeline alternatives, but these can only partly offset disruption. Bypass routes provide resilience; they do not replicate normal seaborne flows. Nor is occasional tanker movement the same as normalisation. For the market to become comfortable, shipping must become regular, safe, “financeable”, and insurable.Sanctions add another layer: a barrel may physically exist and still become commercially unavailable if banks, insurers or shipowners will not support the transaction.Inventories buy time, not immunityThe world’s tanks are not empty. Important buffers remain. U.S. commercial crude stocks stood at about 429 million barrels in mid-August. But its Strategic Petroleum Reserve had fallen to roughly 293 million barrels, the lowest level in more than four decades. China remains the opaque variable because it does not publish comprehensive strategic and commercial inventory data.These buffers explain why the market has not yet moved into full-scale panic. But a barrel stored in the United States cannot instantly replace a delayed Gulf cargo at an Asian refinery. Strategic stocks must be released, matched to refinery needs and transported.Inventories are finite. They are a bridge to restored supply, not a permanent substitute for it.Over the next four to six weeks, three broad scenarios appear possible. The price ranges are indicative, not precise forecasts.If sustained tanker traffic resumes, insurance and freight ease, and loadings become predictable, Brent at $80 to $95 a barrel is possible. If Hormuz remains constrained, bypass routes and alternative crude prevent outright shortages, but inventories keep absorbing the shock, $95 to $110 is most likely. If tanker traffic deteriorates further, export infrastructure is hit, or sanctions materially constrain alternative supplies, $110 to $130 is a plausible risk.Managed normalisation requires more than a ceasefire headline: ships must sail consistently, cargoes load and insurers return on workable terms.The prolonged-impasse scenario appears more plausible. Some Gulf barrels continue moving, alternative supplies prevent absolute scarcity and inventories absorb part of the shortfall. But freight remains high, insurance difficult and voyage distances longer. Brent could move above $100 repeatedly without staying there continuously.A wider escalation would change market psychology. If tanker traffic deteriorated further, export infrastructure or bypass routes were attacked, or sanctions disrupted the shipping and financing ecosystem, buyers would stop treating the disruption as temporary. Precautionary purchasing would intensify and Brent could move rapidly through $110 towards $120 or beyond.There is nothing physically magical about $100 oil, but politically it remains an important threshold.Above it, importing governments face greater inflationary and subsidy pressures, while transport, farming and manufacturing costs rise. Strategic-stock releases and retail-price interventions become politically more likely.Yet the first serious pain may not appear in Brent itself. It may show up in tanker freight, war-risk insurance, diesel cracks and aviation-fuel prices.The International Energy Agency reported in August that global refinery runs in July remained nearly 5 million barrels a day below year-earlier levels, while tighter light and middle-distillate markets pushed refining margins in the Atlantic Basin to record highs. Diesel exports from Russia, West Asia and Asia were 1.3 million barrels a day lower year-on-year.For importing economies, therefore, the relevant number is not simply the crude futures price. It is the delivered barrel and the delivered product.India has flexibility — but not immunityFor India, this distinction is crucial. Indian refiners have demonstrated the ability to process a diverse crude basket and switch sourcing rapidly. That flexibility is a significant strategic strength. But refinery flexibility cannot eliminate geography. Replacing a nearby Gulf barrel with crude from the Atlantic Basin means longer voyages, greater tanker requirements, higher freight and more working capital. Nor are all crude grades interchangeable without affecting refinery yields and economics.The crisis therefore underlines the distinction between diversification of crude supply and security of crude delivery. India can strengthen the former, but cannot fully insulate itself from the latter.In the coming weeks, four indicators deserve more attention than daily changes in Brent.The first is sustained tanker movement through Hormuz. A handful of voyages does not establish normality.The second is marine war-risk insurance and tanker freight. If these remain elevated, the effective cost of supply will remain high even if crude prices temporarily soften.The third is the pricing of Gulf and Asian physical crude relative to global benchmarks. Persistent premiums would signal continuing regional tightness.The fourth is inventory drawdown and product-market stress. If diesel and aviation-fuel margins remain elevated while crude appears calm, the disruption is moving deeper into the refining and distribution system.The IEA estimates that Gulf oil production recovered to 23.9 million barrels a day in July but remained 8.3 million barrels a day below pre-war levels. Regional exports, including bypass routes, fell to about 15 million barrels a day.The distinction could hardly be clearer.The world has oil. What it does not at present have is the ability to move all the oil it wants, from where it is produced to where it is needed, with the speed, certainty and cost the global economy has taken for granted.In the next four to six weeks, continued volatility with an upward bias is expected. A prolonged impasse appears more probable than either rapid normalisation or catastrophic escalation, leaving $100 Brent not as an extreme outcome but as a level the market may repeatedly test.A durable return below $90 will require more than reassuring rhetoric. It will require visible restoration of shipping, insurance, payment channels, and physical deliveries.The oil market’s next decisive signal may therefore come neither from London nor New York. It may come from something simpler: whether tankers can once again move through Hormuz safely, regularly and at scale.Shrikant Madhav Vaidya is former Chairman, Indian Oil Corporation Ltd., energy policy adviser, institutional leader, and advocate for resilient transitions