Brent Crude Oil Surpasses $120/Barrel for the First Time Since June 2022
Brent crude oil prices have risen above $120 per barrel, reaching a new high since June 2022.
The ongoing blockade of the Strait of Hormuz and escalating threats related to Iran have heightened concerns over supply disruptions, driving market expectations for a long-term tight balance and pushing oil prices higher.
Energy and commodity investors are making large-scale purchases of oil-linked assets, shifting capital from low oil price cycles to sectors benefiting from high oil prices. Oil producers and service providers are gaining, while the aviation, chemical, and consumer sectors face significant cost pressures.
Source: Public Information
ABAB AI Insight
Brent crude oil previously peaked at $130 during the 2022 Russia-Ukraine conflict. The recent breach of $120 continues the "supply shock-premium" path driven by geopolitical events, having quickly risen from the $80 range due to the Iran conflict and tensions in the Strait.
In terms of capital flow, traders and funds are amplifying long exposure through futures, ETFs, and energy stocks, while upstream companies see significant increases in free cash flow (with each dollar increase in oil price contributing substantial increments), driving capital reallocation towards shale production, offshore drilling, and midstream infrastructure, creating a self-reinforcing positive feedback loop for high oil prices.
Similar to the 2022 narrative of "higher for longer," this situation is transitioning from temporary to structural. The market is currently in a mid-term phase of shifting from "geopolitical temporary premiums" to "long-term pricing of military risks in the Strait of Hormuz," with the market preemptively pricing in potential months of disruption scenarios.
Essentially, this represents a restructuring of the supply chain: the global crude oil supply chain, traditionally reliant on stable navigation through the Strait of Hormuz, is being disrupted by military blockades and threats. High oil price signals are forcing capital to shift from low-cost Middle Eastern dependencies to alternative routes, strategic reserves, and non-OPEC production, reshaping energy pricing from a "geopolitical optimal" to a "risk premium-dominated" allocation mechanism.