The Strait of Hormuz is the world’s most critical oil chokepoint.<\/p>\n
The Strait of Hormuz is the world’s most critical oil chokepoint. Sahar Al Attar\/AFP\/Getty Images<\/p>\n
The Strait of Hormuz is the world’s most critical oil chokepoint. Sahar Al Attar\/AFP\/Getty Images<\/p>\n
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Oil prices could hit $100 a barrel if tanker traffic disruption through the Strait of Hormuz persists after US and Israel’s strikes on Iran, analysts said.<\/p>\n
US West Texas Intermediate crude oil futures spiked as much 12% at the open on Sunday evening, while Brent crude jumped 13%, as traders rushed to price in the risk of a prolonged disruption in the Gulf.<\/p>\n
WTI futures pared gains to trade 4.8% higher at $70.26 a barrel at 8:33 p.m. ET, while Brent was 5.1% higher at 76.58 a barrel.<\/p>\n
“The key question is when do vessels re-establish export flows,” wrote Alan Gelder, the senior vice president of refining, chemicals, and oil markets at Wood Mackenzie.<\/p>\n
The Strait of Hormuz lies between Iran to the north and Oman and the United Arab Emirates to the south and is the world’s most critical oil chokepoint, where 15 million barrels of crude oil pass daily.<\/p>\n
Following the attack, Tehran warned ships not to pass through the Strait of Hormuz. On Sunday, multiple ships in the strait came under fire, opening up a new front in the conflict.<\/p>\n
Meanwhile, insurers have pulled coverage, and vessels are increasingly reluctant to navigate the passage given the risks.<\/p>\n
“No doubt, tanker rates and insurance will increase dramatically, but these costs would only be a small part of the oil price impact associated with a curtailment of oil flows if they last for more than a few days,” Gelder wrote.<\/p>\n
Wood Mackenzie warned oil prices could potentially exceed $100 per barrel if transit flows are not re-established quickly.<\/p>\n
Dutch bank ING said Brent oil futures could ultimately rise to $140 per barrel in a “worst-case scenario” if there are significant and extended supply disruptions.<\/p>\n
OPEC+ plans supply hike \u2014 but Gulf flows remain constrained<\/p>\n
Vessel tracking data from Kpler shows limited traffic amid the conflict.<\/p>\n
“Commercial operators, major oil companies, and insurers have effectively withdrawn from the corridor,” wrote Amena Bakr, the head of Middle East Energy & OPEC+ research at Kpler. She noted that insurance premiums had already reached six-year highs ahead of the strikes.<\/p>\n
In the most optimistic scenario, Gelder wrote that it could take a few weeks to reestablish export flows.<\/p>\n
He compared the shock to the early days following Russia’s full-scale invasion of Ukraine in February 2022, when fears over Russian supply drove oil above $125 a barrel.<\/p>\n
Over the weekend, major oil producer group OPEC+ said it would increase crude output by 206,000 barrels per day from April to ensure “market stability.”<\/p>\n
However, the additional volumes are effectively stranded if crude cannot exit the Gulf, even if alternative pipelines in Saudi Arabia and the UAE can partially offset the disruption.<\/p>\n
“Whether the Strait is closed by force or rendered inaccessible by risk avoidance, the impact on flows is largely the same,” wrote Jorge Leon, the head of geopolitical analysis at Rystad Energy.<\/p>\n
Leon warned that the effective halt of traffic through the strait could remove between 8 million and 10 million barrels per day from global markets, even after accounting for limited alternative routes.<\/p>\n
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