Oil Price Trends | How much will oil prices rise if the Strait of Hormuz is blocked for several weeks?

Goldman Sachs reports that if oil shipments through the Strait of Hormuz remain stagnant over the next five weeks, Brent crude oil, the international benchmark, could surge to $100 per barrel.

High prices may reduce consumption. The report states that at $100 per barrel, it would help prevent inventories from falling to “dangerously low levels,” approximately 2.6 million barrels, which was the lowest level of commercial crude oil inventories in 2022.

The report indicates that as the duration of the disruption lengthens, the price increase could become more nonlinear, since longer disruptions may increase the time needed to restart and fully restore capacity.

Goldman Sachs has raised its forecast for the average price of Brent crude in Q2 of this year by $10 to $76, and its forecast for NYMEX crude oil by $9 to $71, citing the “severe disruption in the Strait of Hormuz in March,” which is expected to cause a loss of about 200,000 barrels of Middle Eastern oil production.

UBS estimates that (1) if energy infrastructure such as Qatar LNG is attacked, Brent crude could rise above $90 per barrel. (2) If the blockade of the Strait of Hormuz persists for several weeks, oil prices could further surge above $100. (3) If tensions ease in the coming days, risk premiums may decline, but the report notes that oil prices are unlikely to fully fall back to the $60 level seen earlier this year.

JPMorgan Chase forecasts that if the conflict lasts more than three weeks, Persian Gulf oil producers will run out of storage space and be forced to halt production. In this scenario, Brent crude could trade between $100 and $120. Given the uncertain timelines of these factors, current price forecasts remain unchanged for now.

Financial Hot Talk

Will the threat of Middle Eastern conflict to oil supply push prices over $100? Could this impact the global economy?