Brent Prices Soar as Hormuz Disruption Continues

The ongoing tensions between Iran and the US have caused a significant disruption in oil supply through the Strait of Hormuz. This has led to a rise in Brent prices, with Citi raising its third-quarter forecast to $80 from $75. Goldman Sachs also predicts that Brent will remain in an $80 to $90 range until there is either a confirmed agreement or a serious escalation.

The selloff earlier in the week was due to traders front-running a deal, but Friday's rally showed that they were realizing the deal is not close. The gap between Iran's terms and what Washington, insurers, and shipowners will accept is too wide, leaving barrels stuck behind the strait until someone moves first.

Refiners have been covering the Hormuz gap by pulling from storage and rerouting cargoes for weeks, but this is not sustainable. Drawdowns are showing up in the weekly data, making the physical market tighter than the front-month contract looks.