Brent Nears $100 as Hormuz Crisis Drives US Gas Prices Up 42%

Brent crude futures rose $1.05 to $97.05 per barrel on Tuesday, within striking distance of $100 for the first time since the Hormuz crisis began, as new data showed American petrol prices have surged 42.2 percent from a year ago and China has been forced to draw down its billion-barrel strategic petroleum reserve to offset collapsed imports from the Persian Gulf, according to Middle East Eye. West Texas Intermediate gained $1.01 to $94.77.

The rally followed overnight US strikes on Iran’s Qeshm Island and Iranian missile and drone retaliation against Kuwait and Bahrain, a fresh escalation that reminded the market that the underlying conflict is intensifying even as prices had spent weeks consolidating in the low-to-mid $90s.

American consumers absorb the shock

US Transportation Department data released this week showed that the national average petrol price in May was 42.2 percent higher than in May 2025. The figure captures the cumulative effect of months of Hormuz disruption: rerouted tanker traffic, war-risk insurance surcharges, refinery margin expansion and the slow drawdown of the US Strategic Petroleum Reserve.

The pain is unevenly distributed. Diesel, which moves freight, has climbed even faster than gasoline in wholesale markets, and the cost is transmitting into food and consumer goods prices with a lag that is only beginning to show up in inflation readings. The Federal Reserve, already navigating a difficult path between growth concerns and price stability, now faces an energy-driven inflation impulse that monetary policy cannot directly address.

For the White House, the 42.2 percent figure is politically toxic. Gasoline prices are the most visible economic indicator for voters, and the administration’s options for relief are limited. The Strategic Petroleum Reserve has already been drawn down in previous releases, and further sales would reduce the buffer available for a genuine supply emergency — which HSBC warned last week may be approaching faster than most analysts expect.

China burns through its strategic reserves

The most consequential supply-side development may be happening in China. Kpler shipping data compiled by Reuters showed that Chinese crude imports collapsed from 11.4 million barrels per day in February to 6.36 million bpd in May, a decline of roughly 44 percent. Beijing is compensating by drawing down its strategic petroleum reserve, estimated at over one billion barrels — the largest non-US stockpile in the world.

The drawdown reflects a deliberate Chinese strategy: avoid paying spot-market premiums for rerouted barrels and instead consume inventory while waiting for either a diplomatic resolution or a price correction. It is a rational approach for a buyer with the world’s largest reserves, but it has limits. Every barrel drawn from storage is a barrel that is not available for a future disruption. The gap between China’s normal import rate and current purchases — more than five million barrels per day — implies a drawdown pace that cannot be sustained indefinitely.

The China drawdown is also masking the true state of global demand. Because Beijing is not purchasing on the open market at its normal rate, the spot price reflects lower transactional demand than actual consumption would suggest. If and when China returns to the market as a full-volume buyer — whether because reserves approach a threshold Beijing considers uncomfortable or because a deal reopens Hormuz — the price impact could be abrupt.

The same OilPrice analysis cited a warning from the United Nations Conference on Trade and Development that Hormuz disruptions could raise oil import costs for vulnerable economies by $20 billion per year, a burden that falls disproportionately on developing nations in South and Southeast Asia and sub-Saharan Africa that lack strategic reserves of their own.

Demand destruction: the invisible ceiling

Despite what amounts to a major supply disruption in modern oil market history, Brent has not breached the inflation-adjusted records set during prior crises. The reason, according to an OilPrice analysis, is a combination of four forces acting as a ceiling: persistent hope among traders that a diplomatic resolution will reopen the strait, inventory buffers like China’s strategic drawdown, the absence of Chinese spot buying, and — most importantly — accelerating demand destruction.

Demand destruction is the market’s self-correcting mechanism. At $97 a barrel, marginal consumers stop consuming. Trucking firms defer routes. Airlines cancel unprofitable frequencies. Petrochemical plants reduce throughput. Manufacturing shifts to lower-energy processes or pauses altogether. The effect compounds: the longer prices remain elevated, the more consumption is permanently destroyed rather than merely deferred.

The question is whether demand destruction can continue to contain prices if the disruption persists. The OilPrice analysis noted that each of the four ceiling forces is degradable. Diplomatic hope fades with every escalation. Inventory buffers are finite. And demand destruction, while powerful, eventually reaches a floor below which economies cannot cut without systemic damage — factories close permanently, supply chains reorganize, and the economic cost becomes structural rather than cyclical.

India hedges with Oman bypass

India, which imports roughly 85 percent of its crude, is moving to reduce its Hormuz exposure. A Comprehensive Economic Partnership Agreement between India and Oman came into effect on June 1, giving Indian refiners preferential access to Omani crude that can be loaded from ports on the Gulf of Oman and the Arabian Sea — outside the Strait of Hormuz chokepoint.

The timing was fortuitous. The India-Oman CEPA had been negotiated over several years as a standard trade liberalization agreement, but the Hormuz crisis has transformed it into a strategic energy corridor. Oman produces roughly one million bpd, a fraction of India’s nine-million-bpd import requirement, but every barrel that does not need to transit Hormuz reduces New Delhi’s exposure to the chokepoint — and to the war-risk insurance premiums that have added $3 to $5 per barrel to Hormuz-transiting cargoes.

The deal also signals a broader trend. Energy-importing nations are rethinking supply-chain architecture in ways that will outlast the current crisis. Pipeline bypasses, overland routes through Central Asia, LNG-to-oil fuel switching, and bilateral supply agreements with non-Hormuz producers are all receiving investment and political attention that they would not have attracted in a normal market. The Hormuz disruption is not just a price event — it is reshaping the physical infrastructure of global energy trade.

The $100 threshold

The approach to $100 Brent is psychologically significant even if it is not economically distinct from $97. Round numbers focus political attention, trigger contractual price adjustments in long-term supply agreements, and activate hedging strategies that can themselves move markets. Several OPEC-plus members have budget breakeven prices above $90, meaning the current level is comfortable for producers but uncomfortable enough for consumers to generate political pressure for a deal.

Whether Brent crosses $100 depends on the same variable that has driven every major price move since April: the operational status of the Strait of Hormuz. The Qeshm Island strikes and Iranian retaliation against Gulf Arab states suggest the conflict is widening, not narrowing. HSBC’s super-squeeze warning identified the moment when inventories can no longer buffer further disruption. China’s reserve drawdown is buying time, but time purchased from a stockpile is time with an expiration date.

The market is pricing a crisis that has not yet reached its worst case. If it gets there, $100 will look like a way station, not a ceiling.

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For the HSBC supply warning, see HSBC warns of oil super-squeeze as Hormuz nears tipping point. For the overnight escalation, see US strikes Qeshm Island; Iran retaliates against Kuwait, Bahrain. For the diplomatic track, see Trump revises Iran deal terms as oil tops $94.