Could Oil Prices Soar Past $100? The Impact of Strait of Hormuz Disruptions

Potential Surge in Oil Prices

New Delhi: According to consultancy Wood Mackenzie, oil prices may exceed $100 per barrel if tanker traffic through the Strait of Hormuz is not quickly restored. The closure of this vital waterway poses a risk to 15% of the global oil supply and 20% of liquefied natural gas (LNG) supply.

In response to recent US and Israeli strikes on Iranian military and nuclear sites, Iran has issued warnings to shipping in the area, leading insurers to withdraw coverage and halting tanker movements.

Wood Mackenzie highlighted that this disruption creates a dual supply shock, as current exports through the strait are halted, and additional OPEC+ volumes, along with most of OPEC's spare capacity, remain inaccessible until the waterway reopens.

Following attacks on at least three vessels near the Strait of Hormuz, global oil prices surged, with Brent crude rising over 8% to $78.72 per barrel, while US-traded oil increased by approximately 7.6% to $72.20.

"The critical question is when export flows will resume," stated Alan Gelder, senior vice president of refining, chemicals, and oil markets at Wood Mackenzie. He noted that while tanker rates and insurance costs are expected to rise, these increases would be minor compared to the potential price impact if oil flows are disrupted for an extended period.

In an optimistic scenario, it could take weeks for export flows to return to normal, Gelder added.

During this period, oil prices are "heavily risked to the upside." He referenced the early days of the Russia-Ukraine conflict, where fears of Russian supply losses pushed prices above $125 per barrel.

"In the current situation, prices above $100 per barrel are likely if transit flows are not quickly restored," he remarked.

India, which imports 88% of its crude oil, would face increased import bills and inflation due to rising prices.

OPEC+ Production Adjustments

On March 1, eight OPEC+ nations, including Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman, agreed to begin unwinding their April 2023 production cut of 1.65 million barrels per day. Output is set to increase by 206,000 barrels per day in April, with a review planned for April 5.

However, Gelder cautioned that this decision may be irrelevant if flows through the Strait of Hormuz remain suspended.

"The OPEC+ decision is not surprising given the uncertainty surrounding US-Iran tensions, and the market for non-sanctioned crude is tight," Gelder explained. "Yet, there is a risk that the OPEC+ decision becomes moot if flows do not resume through the Strait of Hormuz."

While alternative routes exist, such as Saudi Arabia's East-West pipeline to the Red Sea and additional Iraqi exports via the Mediterranean, they cannot fully compensate for the loss of shipments through the strait.

Strategic stock releases by members of the International Energy Agency could provide limited relief, but these countries account for less than half of global oil demand.

Implications for the Gas Market

A halt in LNG flows through the Strait of Hormuz would also disrupt global gas markets. In 2025, approximately 81 million tonnes (110 billion cubic meters) of LNG passed through the strait, primarily from Qatar, representing nearly 20% of global supply.

"Disruptions to LNG flows would reignite competition between Asia and Europe for available cargoes," said Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie. He noted that European storage levels are below seasonal norms and about 10% lower than the previous year due to a severe cold spell in January.

Each week that LNG flows are halted puts around 1.5 million tonnes (2.2 bcm) of exports at risk. Asian and European buyers would need to rely more heavily on storage and increase summer restocking, tightening market conditions even after the strait reopens.

Additional pressure may arise from precautionary closures of Israel's Leviathan and Karish gas fields, which supplied over 10 bcm to Egypt last year, prompting Cairo to increase LNG imports. Potential disruptions to Iranian pipeline exports to Turkey, which exceeded 7 bcm in 2025, could further strain supply.

Di Odoardo indicated that a prolonged halt in LNG exports would be comparable in scale to the reduction of Russian gas supplies to Europe, which drove prices to nearly $100 per million British thermal units at their peak and averaged $40 per mmbtu in 2022. However, he suggested that the market reaction might be less severe if the Hormuz disruption is perceived as temporary.

Historical Context

Gelder noted that the closest historical parallel is the 1970s Middle East oil embargo, which caused prices to surge by 300% to around $12 per barrel in 1974—equivalent to roughly $90 per barrel in today's terms.

"Surpassing this in the current market, which is concerned about significant supply losses, seems very achievable," he stated.

Although the global economy is less oil-dependent than it was five decades ago, prices would need to exceed $200 per barrel to create a shock comparable to that of the 1970s embargo, Gelder added.