Oil prices are projected to soar to $200 per barrel and potentially beyond if the ongoing closure of the Strait of Hormuz continues. Fereidun Fesharaki, Chairman Emeritus of energy consultancy FGE NexantECA, discussed this scenario during an interview with Bloomberg, noting that the impact on oil supply due to geopolitical tensions is becoming increasingly severe.
Fesharaki pointed out that the current market is heavily influenced by sentiment, specifically referencing U.S. President Donald Trump’s social media remarks regarding the war. He highlighted that the sheer volume of oil not being transported is staggering, with 100 million barrels per week and approximately 400 million barrels per month currently not passing through the critical shipping lane. Such significant supply losses could lead to astronomical price increases in the near future.
Should the current situation persist without any improvement over the next six to eight weeks, oil prices are expected to escalate dramatically, irrespective of political statements. Fesharaki expressed concerns, estimating that prices could first rise to $150 per barrel, eventually reaching the $200 mark and possibly higher.
In a recent note, Fesharaki elaborated on evolving projections regarding the crisis duration. Initially, FGE NexantECA assumed the conflict would last four weeks, then extended this to six weeks, and is now assessing a timeframe of 8-12 weeks. He emphasized that if the closure persists with minimal flow—assuming only 10% of previous traffic through the strait—prices could spike to between $150 and $200 per barrel. Additionally, spot gas prices could reach as high as $40.5 per MMBtu, equating to $250-$300 per barrel when considering oil equivalents, to significantly curb demand.
The International Energy Agency (IEA) is expected to respond to the situation by releasing strategic reserves in mid-April, with another possible release later in June. However, the longer the closure lasts, the more likely it is that the world will face a “world without Hormuz,” a scenario that could lead to persistent impacts on global energy, logistics, and trade patterns.
Fesharaki warned that if such a situation materializes, it could result in a global disaster, triggering a severe economic recession that could last several years. Numerous analysts, including those from Macquarie Group, share similar sentiments, forecasting that if the conflict in the Middle East extends through the second quarter, oil prices could indeed reach unprecedented highs of $200 per barrel.
