Why Oil Isn't Already $150—And What Could Tip It There

Oil markets are facing one of the largest supply shocks in history, yet prices have not surged as high as many analysts expected — at least not for now, Fortune reports.

The war involving Iran has effectively choked off the Strait of Hormuz, a critical passageway that normally carries about 20% of the world’s oil and liquefied natural gas. Under such conditions, many experts say crude prices should already be soaring well beyond current levels.

Instead, U.S. benchmark oil is hovering near $118 a barrel, up roughly 70% this year.

Analysts point to a mix of factors keeping prices in check, including reduced reliance on Middle Eastern oil in the U.S. and Europe, larger global emergency reserves, and lingering market optimism that the conflict will be contained.

But beneath the surface, warning signs are flashing.

“Make no mistake, barrels moving out of the Middle East are already being priced closer to $150,” said Andrew Harbourne, senior oil analyst at Wood Mackenzie.

If disruptions drag on, he added, global prices could “push beyond $200 per barrel as a function of duration.”

Escalating attacks on key energy infrastructure are raising the stakes.

Strikes on Iran’s South Pars gas field and retaliatory threats across the Gulf have already disrupted production. The United Arab Emirates has halted operations at one of its major gas facilities following drone attacks, and even alternative export routes have come under fire.

If that damage becomes sustained, analysts say markets could quickly reprice. Some forecasts suggest U.S. crude could jump to $130 a barrel within weeks, with further upside risk if supply losses deepen.

For now, the United States is somewhat shielded. Only a small portion of its oil supply, just 3%, comes directly from the Middle East, with domestic production and imports from Canada and Mexico doing most of the heavy lifting.

Still, global energy markets remain tightly linked, and disruptions abroad inevitably ripple into U.S. prices.

Those effects are already spreading well beyond gasoline.

Higher oil prices are driving up costs across the economy, from aluminum and fertilizer to grains, cooking oil, and petrochemicals. The result is broader inflation, pushing up prices for food, electronics, pharmaceuticals, and a wide range of consumer goods.

Much of the immediate pain is being felt in regions more dependent on Middle Eastern energy, particularly in Pakistan, Bangladesh, and Southeast Asia, where supply disruptions are hitting hardest.

Even so, rising energy costs are becoming an increasingly sensitive political issue in the United States. With fuel prices climbing, pressure is building ahead of the midterm elections.

“Everybody knows this can’t continue. Nobody knows how it ends,” said Jim Wicklund, managing director at PPHB.

“This is interrupting economic commerce for everyone in the world to the tune of billions of dollars a day,” he said, adding that President Donald Trump is increasingly uneasy with oil prices above $100 a barrel as election concerns mount.