Higher oil and gas prices are certain as the closure of the Strait of Hormuz threatens to disrupt 15 percent of global oil supply and 20 percent of global LNG supply.
That’s what Wood Mackenzie said in a press note sent to Rigzone late Sunday, adding that oil prices could potentially exceed $100 per barrel if tanker flows are not quickly restored.
“Following U.S. and Israeli attacks on Iranian government, military, and nuclear facilities, Iran warned shipping away from the waterway and insurers withdrew coverage, effectively halting tanker traffic,” Wood Mackenzie highlighted in the note.
The company said the disruption creates a “dual supply shock”.“Not only are current exports through the Strait halted, but OPEC+ additional volumes and ultimately most of OPEC’s spare capacity – typically a key lever for balancing the global oil market – are inaccessible while the waterway remains closed,” Wood Mackenzie warned.
Alan Gelder, SVP of Refining, Chemicals and Oil Markets at Wood Mackenzie highlighted in the press note that the key question now is “when do vessels re-establish export flows”.
“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,” he added.Gelder warned that, given the uncertainty around events, it is plausible that it takes a few weeks for export flows to re-establish themselves in the most optimistic scenario.“During that time, oil prices are heavily risked to the upside,” Gelder stated.“The most recent comparison is during the early days of the Russia/Ukraine conflict, when the fear of loss of Russian supplies drove the oil price to over $125 per barrel,” he said.Gelder went on to point out that “the nearest historical analogue” in Wood Mackenzie’s view is the Middle East oil embargo of the 1970s, “which increased oil prices by 300 percent to around $12 per barrel in 1974”.
“That is only $90 per barrel in 2026 terms. Eclipsing this in today’s market concerned about significant losses of supply seems very achievable,” he said.
“The global economy is now far less oil intensive than 50 years ago. The shock at the time of the oil embargo was the pace and scale of the price increase,” he added.
“Oil prices would need to reach well over $200 per barrel to exert a similar level of shock to today’s global economy,” Gelder noted.