Alright, let's get straight to the point, because what has happened over the past few hours is something the entire world is literally paying for. Brent crude has climbed above $100 per barrel for the first time in almost two months. It surged more than 6% in a single day, and since July 10, it has gained more than 30%.
In the United States, gasoline prices have climbed back above $4 per gallon. And do you know why? Because the U.S.-Iran conflict, which many thought had calmed down, has flared up again. This time, however, a second front has opened.
Let's break it all down.
Let's start from the beginning. In June, the United States and Iran agreed to a temporary ceasefire. The goal was to create room for negotiations over Tehran's nuclear program.
And then?
Around July 7 to 10, everything fell apart.
Since then, there have been 12 consecutive days of U.S. strikes against Iranian military targets, including missile sites, air defense systems, and weapons depots. The United States also reimposed a naval blockade on Iran and ended the sanctions waiver that had allowed exports of Iranian oil.
Iran responded by launching attacks on U.S. bases in Kuwait and Jordan. There was also an attack at a border crossing with Iraq that left two people dead. In short, the June ceasefire now exists only on paper.
The Iranian-backed Houthis in Yemen attacked two Saudi oil tankers in the Red Sea.
One of them, Encelia, was carrying fuel products. The other, Layla, was transporting crude oil. It was the Houthis' first attack on commercial shipping in months.
"So what does that have to do with us?" you might be asking.
Quite a lot, actually.
Trump immediately declared that from now on the United States would hold Iran responsible for every Houthi attack, arguing that the Houthis are effectively Tehran's proxies.
And as if that wasn't enough, he issued an even tougher warning. He said that every time Iran attacks a vessel in the Strait of Hormuz, the United States will destroy an Iranian bridge or energy facility. Iran responded by threatening to strike infrastructure and energy installations across the region.
You can probably see where this is heading.
Now let's get to the part that is really hurting the markets.
Until yesterday, there was only one major problem.
Now there are two.
Here's what I mean.
The Strait of Hormuz, through which a massive share of the world's oil supply normally passes, is effectively shut down. Very few ships are willing to transit the waterway.
Saudi Arabia's workaround was to reroute its oil through the Red Sea via the port of Yanbu. That was the backup plan.
Now the Houthis are threatening that exact alternative route.
In other words, the region's two key export routes for oil are both under pressure at the same time.
Already, more than seven ships have changed course to avoid the Bab el-Mandeb Strait. Buyers in India and across Asia are considering sending their vessels along a much longer and more expensive route.
That said, not everyone has backed away.
Two Chinese tankers ignored the risks and sailed through the Red Sea anyway.
But the speaker of Iran's parliament summed up Tehran's position bluntly:
"Either everyone sells oil, or no one does. If we can't sell our oil, nobody will."
Now for the most remarkable part.
Brent jumped more than 6% in a single day, pushing above $100 per barrel.
To put that into perspective, oil has risen roughly 36% this month alone. Yes, you read that correctly. It is the third largest monthly increase of the past decade.
"So why has it risen so much?"
Because it's not just about shipping routes.
Global oil inventories have been depleted after months of conflict. At the same time, Kazakhstan was forced to suspend crude exports through its main Black Sea terminal following drone attacks, reducing global supply even further.
Goldman Sachs is already warning that if disruptions in the Strait of Hormuz continue, Brent could climb above $120 per barrel.
There is also a political angle to all of this.
Higher fuel prices are putting increasing pressure on American consumers, with the November midterm elections approaching. Trump insists prices will come down, saying, "Give me a little time."
For now, however, the market sees only one direction: higher.
