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Strait of Hormuz Closure Could Send Oil to $150 a Barrel, Warns Nuvama

A Nuvama report warns that a continued closure of the Strait of Hormuz for 4-8 weeks could send global crude oil prices soaring to between $110 and $150 per barrel. The chokepoint handles about 20 million barrels per day, and a prolonged shutdown would severely tighten global supply. Asian economies like China, India, Japan, and South Korea, which receive 13 mbpd via the strait, would be the hardest hit. While strategic oil reserve releases could provide temporary relief, the disruption could also force refinery run cuts and spike LNG prices.

Key Points: Strait of Hormuz Closure May Push Oil to $150/Barrel

  • 20 mbpd oil flow at risk
  • Asian economies most affected
  • Strategic reserves may offer short relief
  • LNG supply disruption looms
  • LPG is highly vulnerable
2 min read

Crude oil may touch USD 150 per barrel if Strait of Hormuz remains closed for 4-8 weeks: Nuvama

Nuvama report warns a 4-8 week Strait of Hormuz closure could spike crude oil to $110-$150/barrel, severely impacting Asian economies.

"crude prices could approach around USD 150 per barrel - Nuvama report"

New Delhi, March 13

Global crude oil prices could surge to as high as USD 150 per barrel if the Strait of Hormuz remains closed for the next four to eight weeks, according to a report by Nuvama.

The report highlighted that the continued closure of the Strait of Hormuz (SoH), which handles around 20 million barrels per day (mbpd) of oil flows, could significantly tighten global supply and push crude prices into the range of USD 110-150 per barrel within four to eight weeks.

It added that the disruption has already slowed maritime traffic in the region to a near halt, tightening the global crude balance. The market had initially priced in a disruption of about two weeks, but expectations are now shifting toward a longer outage.

According to the report, if the closure continues for an extended period, particularly up to eight weeks, crude prices could approach around USD 150 per barrel. However, it noted that such high price levels would likely trigger demand destruction and encourage alternative supply responses in the market.

The report added that releasing strategic oil reserves could provide short-term relief but may also create demand for future restocking. It noted that releasing around 300-400 million barrels could ease supply pressures in the near term.

At the same time, export limitations from West Asia could force shutdowns of around 6-7 mbpd, equivalent to more than 200 million barrels in March, which would keep the global crude market tight.

The report highlighted that Asian economies are expected to be the most affected by the disruption. Around 13 mbpd of oil shipments to countries such as China, India, Japan and South Korea pass through the Strait of Hormuz.

While some countries may rely on their strategic reserves to cushion supply shocks, those with limited reserves could be forced to reduce refinery runs.

The report also discussed the potential impact on global gas markets. It noted that Qatar's LNG production could restart within two weeks after the reopening of the Strait of Hormuz, as facilities remain undamaged.

The report further pointed out that India remains highly vulnerable to disruptions in the Strait of Hormuz. While crude supplies may remain manageable in the short term, higher LNG prices could lead to reduced imports.

Among petroleum products, LPG is expected to be the most vulnerable in case of prolonged disruptions in the region, the report added.

- ANI

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Reader Comments

P
Priya S
LPG being the most vulnerable is terrifying news. So many Indian homes, especially in rural areas, depend on it for cooking. A price surge or shortage would be a direct hit on women and families. Hope the authorities are preparing contingency plans for essential fuels. 🙏
A
Aman W
Time to seriously double down on renewables and electric vehicles. We can't keep being at the mercy of geopolitics in the Gulf. Every crisis like this shows why energy independence is national security.
S
Sarah B
Living in India for 5 years now, and I see how fuel prices ripple through everything - from veggies to auto-rickshaw fares. This report is a sobering reminder of global interconnectedness. Hoping for a swift diplomatic resolution to reopen the Strait.
K
Karthik V
While the report is alarming, I respectfully think it's a bit speculative. The market always finds a way - alternative routes, increased production from other regions. $150 seems like a worst-case headline. Still, we should be prepared, but let's not panic just yet.
N
Nisha Z
The impact on LNG is crucial too. It's not just about petrol. Power generation and industries use gas. A double whammy on oil and gas could really slow down manufacturing and hurt job creation. Government needs to communicate clearly about reserves and plans.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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