Global crude oil prices could surge to as high as USD 200 per barrel if the Strait of Hormuz remains closed for a prolonged period, according to a report by Wood Mackenzie. The report warned that continued disruption in one of the world’s most important energy routes could intensify inflationary pressures, disrupt supply chains and weaken global economic growth.
More than 11 million barrels per day of Gulf crude and condensate production is currently impacted due to tensions around the Strait, the report said. It added that over 80 million tonnes per annum of LNG supply, accounting for nearly 20 per cent of global LNG supply, is also at risk.
“The Strait of Hormuz is the most critical chokepoint in global energy markets, and a prolonged closure would become far more than an energy crisis,” said Peter Martin, head of economics at Wood Mackenzie. “The longer disruption persists, the greater the impact on energy prices, industrial activity, trade flows and global economic growth,” he added.
The consultancy outlined three possible scenarios based on how long the disruption continues and how quickly diplomatic negotiations move forward.
Under the “Quick Peace” scenario, tensions ease by June and supply flows begin normalising. Brent crude prices are projected to decline to around USD 80 per barrel by the end of 2026 and further soften to nearly USD 65 per barrel in 2027.
The second “Summer Settlement” scenario assumes negotiations continue through late summer while the Strait remains largely closed. In this case, oil and LNG shortages could continue through the third quarter of 2026, increasing the risk of a shallow global recession in the second half of the year.
In the worst-case “Extended Disruption” scenario, the Strait remains largely shut through the end of 2026 with recurring tensions further tightening oil supply. The report estimated crude prices could touch USD 200 per barrel despite global oil demand falling by nearly 6 million barrels per day in the second half of 2026. It also projected the global economy could contract by up to 0.4 per cent during the year.
The report further noted that a prolonged disruption may accelerate the shift towards alternative energy sources, particularly across Asia and Europe, as countries look to reduce dependence on hydrocarbons. It also highlighted a potential boost for US LNG exporters amid growing demand for diversified energy supplies. |
