Crude oil prices could hit $200 per barrel if Strait of Hormuz remains closed: Report
New Delhi, May 22
,: Global crude oil prices could rise to $200 per barrel in the worst-case scenario if the Strait of Hormuz remains closed, warned a report from Wood Mackenzie.
Global energy markets have been on edge since the start of the Iran war in February. Oil prices have shot up, sending shockwaves across the globe as worries mount around higher inflation and interest rate hikes.
The report elaborated three possible scenarios with different timelines on opening the Strait of Hormuz and the subsequent impact on oil and gas supply, prices, energy demand and the broader global economy.
The uncertainty around the Strait has put the supply chains at risk with repercussions that could hit economies hard. More than 11 million barrels per day of Gulf crude and condensate production is currently curtailed, and over 80 million tonnes per annum of LNG supply, which form 20% of global supply, is affected, the report said.
"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.
Under the most optimistic "Quick Peace" scenario, the warring parties reach a resolution by June, bringing immediate relief for the global economy. Brent crude eases to around $80 per barrel by the end of 2026 and falls further to $65 per barrel in 2027.
'Summer Settlement' scenario assumes the negotiations continuing until late summer, with the Strait largely closed. Oil and LNG shortages persist through Q3 of 2026, with risks of a shallow global recession by the second half of 2026.
The worst-case scenario imagines the Strait remaining largely closed through the end of 2026, with bouts of tensions spiralling between the two sides further constraining oil supply. Oil prices could reach $200 per barrel despite global oil demand falling by 6 million barrels per day in H2 2026. The global economy could contract by as much as 0.4% in 2026.
Under the Extended Disruption scenario, there will be a renewed push for alternative energy sources, and countries in Asia and Europe could cut down on hydrocarbon use with increased electrification.
The report also envisages a positive outlook for US LNG exporters as they benefit from growing demand for supply diversification.
— ANI
Reader Comments
Interesting analysis. India imports more than 80% of its crude oil, so any disruption in the Strait of Hormuz is a direct threat. The 'Extended Disruption' scenario actually sounds like a bad dream — imagine 20% of global LNG supply hit. The US LNG exporters will gain, but for us as a major Asian buyer, it's going to be painful. Hope our government has some strategic reserves in place.
Arre yaar, this is scary 😰 Our daily commute is already burning a hole in our pockets. And what about the inflation? Milk, vegetables, everything goes up when petrol prices rise. The 'Summer Settlement' scenario with a shallow global recession also sounds bad. But honestly, I think the 'Quick Peace' scenario is too optimistic given how geopolitical tensions are rn. Let's pray for peace.
I wish we would stop being so dependent on oil imports. India has so much solar potential in Rajasthan and Gujarat, but progress is slow. This report is a wake-up call — we can't keep relying on unstable geopolitics for basic energy needs. Also, the $200 scenario would devastate rural India where logistics cost everything already high. Green transition is the only sensible way forward.
Good report but it lacks the perspective on what India specifically should do. As one of the largest oil importers, we're particularly vulnerable. The 'Extended Disruption' scenario says countries in Asia will cut hydrocarbon use — but that takes years of planning. For now, we need to diversify our import sources, maybe increase imports from Russia or Africa. Also, why aren't we building more strategic petroleum reserves?
S We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.