Oil may top $100 as Hormuz, Russia risks persist: Mirae Asset Sharekhan

Mirae Asset Sharekhan believes that the crude oil market balance is likely to remain in deficit through 2026.

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

 

Brent nearing $100 as conflicts prolong 

 

The global crude oil market is again moving towards the $100 per barrel mark, with prices touching a fresh six-week high on Thursday and gaining nearly 7 per cent for the week. The move is being driven by a thinner buffer of crude reserves, renewed US-Iran conflict, and continuing Ukrainian attacks on Russian energy infrastructure.

 

Together, these disruptions are tightening the physical market, with no clear end in sight, and have shortened global supplies by roughly 8-10 mbpd as of August 2026.

 

 

Prices eased from their best levels after signs emerged that some oil was still moving through the Strait of Hormuz. However, the risk premium remains high after the US carried out several rounds of strikes against Iran, targeting radar systems and mine-laying capabilities along Iran’s southern coast. Iran retaliated with drone and missile attacks on US bases across the Middle East, keeping the market nervous about any further disruption to Gulf flows. 

 

Asian crude oil imports are rising again

 

After the initial shock in March-April, when the war peaked and oil futures traded above $120 per barrel, the physical Middle Eastern barrels were quoted as high as $165-180 per barrel because of the risk around the war-torn Strait of Hormuz. That led to demand destruction among Asian buyers, which were heavily dependent on West Asia barrels. The situation has improved since then, but Asian refiners have had to adjust quickly.

 

The Asian crude basket is now seeing a higher share of African, US, Venezuelan and Russian oil to compensate for the lost Middle East barrels. This is also reflected in refinery runs. By the end of August, India, China, Japan and South Korea together were able to process around 24 mbpd of crude as capacity and utilisation improved. 

 

 

India and China compete for Russian barrels

 

As China increased its Russian crude intake in August, benchmark Russian grades started quoting at premiums to Brent, which affected India’s August imports. India’s Russian oil imports fell 26 per cent, from 2.82 million bpd in July to 2.08 million bpd in August. 

 

Russia’s share in India’s crude basket also dropped from 55.9 per cent to 45 per cent. At the same time, Venezuelan oil imports jumped 60.2 per cent to 350,000 bpd, their highest monthly level since February 2020. Total oil imports fell 8.4 per cent, from 5.04 million bpd to 4.62 million bpd. India’s crude oil import bill surged 57 per cent during the April-July period without any significant increase in import volumes.

 

April-July imports were 81.9 million tons in 2025 against 81.5 million tonnes in 2026, while the bill rose from $40.5 billion to $63.4 billion.

 

With dated Brent trading above $100 and futures holding above $90 for most of August, every $10 increase in Brent adds roughly $12-15 billion to the annual import bill. July’s trade deficit was already close to $32 billion, and a prolonged conflict could worsen the current account deficit in FY27.

 

On the other hand, China’s refinery runs also improved in August, with state refiners back at 68 per cent capacity and Shandong refiners running at 56 per cent utilisation. China’s state refiner Sinopec has continued to snap up Russian oil to offset part of its supply losses from the Middle East. China’s imports of Russian oil rose by about 200,000 bpd in August to nearly 1.6 million bpd, the highest since March. This was the third consecutive monthly increase, taking the cumulative gain over that period to around 500,000 bpd.

 

War is tightening middle distillates

 

The shortage of barrels is feeding into the global diesel crunch because crude from the region naturally yields a high proportion of middle distillates such as diesel, jet fuel, kerosene and heating oil. Middle East grades typically produce around 60 per cent combined middle distillates.

 

The closure of Hormuz has blocked nearly 8 mbpd of crude flows to Asia in August, removing core feedstock for Asia’s distillate-oriented refiners. Refined products such as diesel have therefore seen even steeper gains due to the combined pressure from the Middle East conflict and the Russia-Ukraine war.

 

Diesel remains the real pain point for the world economy over the next six months, as it powers a large part of global activity through farm equipment, trains, trucks and irrigation systems in countries such as Bangladesh, Brazil and Australia. Diesel prices in the US have reached a four-year high, with the average price at $5.78 per gallon, while European stockpiles remain well below seasonal levels.

 

Russia may retaliate as infrastructure losses mount

 

Ukrainian attacks on Russian energy infrastructure in 2026 have already derailed Russia’s crude exports and processing capacity. This will likely worsen the global oil supply deficit, even as demand takes a hit from the war and higher prices.

 

Russian crude-processing rates averaged 3.51 million bpd in July, the lowest in 24 years, after drone and missile attacks damaged key energy assets. The attacks also reduced Russia’s crude production in July to 8.89 million bpd, the lowest in six years.

 

Ukraine attacked Russian refineries, oil tankers and major pipeline infrastructure at least 30 times in July, the second-highest monthly number of attacks since the war began in 2022.

 

Forcing one of the world’s largest refiners to suspend diesel exports, while shipping snarls in the Strait of Hormuz have further reduced global diesel supply.

 

Tanker data shows flows are still fragile

 

Primary data from shipping trackers showed that roughly 4.8 mbpd of crude oil moved in August through the Strait of Hormuz with the help of the US Navy through Omani waters. However, the opening of a second choke-point risk at Bab-el-Mandeb in the Red Sea by the Houthis has added another layer of supply stress. Saudi Arabia’s August crude exports dropped to about 3 million bpd, the lowest level in nine years. This shows that while some oil continues to move, the market cannot treat these flows as normal or risk-free as still 7-8 mbpd of oil is curtailed. 

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Outlook

 

We believe the crude oil market balance is likely to remain in deficit through 2026. If the war is prolonged, the deficit could extend into Q1 2027. Demand is also expected to stay firm because OECD reserves need replenishment after being drawn down by roughly 600-700 million barrels over the last 190 days of war.

 

The cumulative loss of oil output from Persian Gulf producers is expected to exceed 2 billion barrels by the end of October and total 2.3-2.4 billion barrels for 2026.

 

Higher crack spreads are helping Asian refiners offset higher import prices by increasing exports of petroleum products to Europe and other regions.

 

As long as geopolitical risks remain around Hormuz, Russia and Red Sea flows, crude oil prices are likely to trade above $100 per barrel, with diesel and middle distillates staying the tightest part of the barrel.