Oil may hit $100 by mid-Sept as US-Iran standoff persists: Mirae Asset

Mirae Asset Sharekhan said that in the absence of any resolution between the US and Iran, each passing week would see floor prices increasing for global oil prices.

Disclaimer: This article is written by Mohammed Imran, research analyst, Mirae Asset Sharekhan. Views expressed are his own. Readers' discretion is advised.

 

Higher crude oil prices risks demand destruction

 

The second-order effects of the US–Iran conflict are now visible in global oil markets. Crude prices have traded in an unusually wide range of nearly $40/bbl, driven by rapid shifts in diplomatic expectations and renewed escalation risk. Hopes of progress triggered sharp declines in June and early July, but the return of hostilities pushed prices as high as $105/bbl on 23 July. Although the standoff has not escalated into direct large-scale military exchange over the past two weeks, physical markets remain tight: Dated Brent is holding above $90/bbl, Brent futures remain above $85/bbl, and WTI continues to trade above $80/bbl.

 

IEA Inventory Update: Stock Draws Deepen

 

The International Energy Agency’s latest monthly report shows that global observed oil inventories fell by 69 million barrels in July. The draw was driven by renewed disruptions to crude flows through the Strait of Hormuz and the Caspian Sea, alongside a decline in floating inventories. Onshore stocks fell by a more modest 6 million barrels as the pace of emergency stock releases slowed even as Chinese crude inventories continued to draw. Since the start of the conflict, monitored stocks have fallen by an estimated 410 million barrels, equivalent to roughly 2.7 mb/d on average.

 

Refined products: The main pressure point

 

The most visible stress is now in refined products, where shortages directly affect economic activity. Global refinery crude throughput improved in July as US and European refiners returned from annual maintenance, but overall runs remained nearly 5 mb/d below year-earlier levels at 80.9 mb/d. Continued Middle East product export disruptions and attacks on Russian refineries kept the system under pressure. Global refining capacity is still expected to fall by 370 kb/d by the end of Q3, while throughput may decline by an average of 2.5 mb/d in 2026 before rebounding by 3.5 mb/d in 2027. Tighter light and middle distillate markets have pushed cracks and margins to record highs: Singapore gasoil cracks against Dubai averaged $63.99/bbl, while European gasoline cracks against Brent averaged $55.88/bbl.

 

China: Price sensitivity and EV substitution

 

Price-sensitive Asian demand is showing signs of adjustment, particularly in China. EV penetration has remained above 60 per cent Y-o-Y in 2026, and Chinese crude demand is expected to lose around 1.5 mb/d to EV substitution. Lower refinery activity explains roughly half of the import reduction. Official data from China’s National Bureau of Statistics show that refinery runs fell by 2.7 mb/d from pre-war levels through June, the steepest contraction on record and deeper than the decline seen during the COVID-zero period in 2022.

 

Demand outlook: Contraction in 2026, recovery in 2027

 

The IEA now expects global oil demand to contract by 1.6 mb/d in 2026, as the ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on consumption. The annual contraction is expected to ease from 4.9 mb/d in 2Q26 to 2.8 mb/d in 3Q26, before demand returns to growth in the final quarter. For 2027, demand is projected to expand by 2.4 mb/d.

 

GCC to remain in pain

 

Global supply remains constrained by GCC disruptions, even as non-OPEC+ producers continue to add barrels. Supply rose by 2.4 mb/d month-on-month to 101.5 mb/d in July, but remained 6.3 mb/d below year-earlier levels, with 8.3 mb/d of Gulf output still shut in. Renewed hostilities and maritime disruptions in July and early August have reduced projected 3Q26 oil supply by 1.7 mb/d compared with the previous IEA report. Global oil supply is now projected to decline by 4.3 mb/d on average in 2026 before rebounding by 8.3 mb/d in 2027 to 110.3 mb/d.

 

US inventories

 

The latest EIA data show that US inventory buffers remain thin. As of 7 August, crude oil inventories were 1.8 per cent below the seasonal five-year average, gasoline inventories were 5.8 per cent below average, and distillate inventories were 11.9 per cent below average. US crude production rose slightly to 13.805 mb/d in the week ending 7 August, just below the November 2025 record of 13.862 mb/d.

 

Outlook:

 

There is still no clear sign of progress between the US and Iran on a durable agreement to reopen the Strait of Hormuz. While some vessels continue to move through the waterway with transponders switched off, traffic remains far below normal levels. Until flows normalize, refined-product shortages, weak inventory buffers, and persistent geopolitical risk should keep the crude price floor elevated and volatility high.

 

We believe that in the absence of any resolution between the US and Iran, each passing week would see floor prices increasing for global oil prices, by mid-September dated brent could see $100 mark and Brent futures above $90.