《The Signal of a $111 Oil Price: The Market Is Pricing in a “Chronic Strait Crisis”》

A screenshot from Jin10 Data shows that WTI crude oil has reached $111.210 per barrel, gold is at $4,688.87 per ounce, and the US dollar index is at 99.811. After Iran clearly rejected a ceasefire and emphasized a “permanent end to the war,” these figures are not short-term fluctuations—rather, the market is pricing a new norm: the Strait of Hormuz will remain in a state of “not blockaded, but continuously tense” for the long term.

Unlike the tanker war period of 1984, today’s global oil market has already lost two important buffers. First, OPEC’s remaining spare capacity is highly concentrated in Saudi Arabia and the UAE, and because these two countries have delicate relations with Iran, they cannot and have no intention of endorsing Iran’s conflict. Second, after the release of strategic petroleum reserves over the past few years, most countries are at historic lows. This means that once any actual friction occurs in the strait, oil prices will not just rise to 120, but could instantly gap up to above 150.

What is even more worth paying attention to is that Iran’s “ten-point terms” have not been made public, but the wording “permanent end to the war” implies that what Iran wants is not a temporary ceasefire, but a package deal that includes sanctions relief, security guarantees, and economic compensation. Such a price demand is almost impossible to be accepted by the US in the short term. Therefore, the market will remain trapped for the long term in a cycle of “negotiation—stalemate—threat—re-negotiation.” With each cycle, the bottom of oil prices will be pushed up.

For Asian countries that rely on oil imports (especially China, India, and Japan), this means that imported inflation will become normalized. For Europe, it is another burst of fire added on top of already high energy prices, which may force the European Central Bank to continue raising interest rates despite recession risks. For the United States, high oil prices in an election year are a political bomb—this is also why Trump, on the one hand, swears and threatens, and on the other, submits a proposal through Pakistan, because he cannot afford a truly runaway situation.

Conclusion: A $111 oil price is not the endpoint, but a warning of a new starting point. The market is telling everyone: the “peace premium” in the Strait of Hormuz has disappeared.
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