Global energy analysts are now mapping out scenarios in which crude oil prices more than double from pre-war levels, with Macquarie Group placing a 40% probability on Brent crude surpassing $200 per barrel if the war in Iran and the closure of the Strait of Hormuz persist through the end of June.
In a note to clients issued on Wednesday, Macquarie analysts led by Vikas Dwivedi said a conflict stretching through the second quarter would result in historically high real prices. The firm’s base case, assigned 60% probability, holds that the war ends by the close of March, after which oil prices moderate and global economic damage remains limited.
The Strait of Hormuz closure has sent both crude and refined product prices soaring due to the magnitude of the disruption. In pre-conflict times, the waterway saw daily transits of about 15 million barrels of crude, as well as 5 million barrels of refined products.
Brent crude closed Friday at $112.57 per barrel, its highest level since July 2022, when Russia’s invasion of Ukraine shook energy markets. West Texas Intermediate (WTI) settled at $99.64 per barrel. Since the war between United States and Israeli forces and Iran broke out on February 28, Brent has surged by more than 50% and nearly hit $120, while WTI has leapt around 43%.
Macquarie is not alone in the $200 scenario. Speaking at CERAWeek by S&P Global, a major energy conference, Dave Ernsberger, head of S&P Global Energy, said his team had forecast that if the war continues, the market could easily see $200 to $250 a barrel. Saudi Arabian energy officials have separately told the Wall Street Journal that prices could reach $180 per barrel if the conflict persists into late April.
The corporate cost projections are already stark. In a note to employees dated March 20, United Airlines chief executive Scott Kirby projected oil reaching $175 per barrel and not moderating back to $100 until 2027. Kirby said the doubled cost of jet fuel could add an additional $11 billion in annual fuel expenses for United if prices remain at current levels.
Trump on Thursday paused planned strikes on Iranian energy facilities for 10 days at Tehran’s request, with talks reportedly progressing. The pause stretched the timeline on potential attacks to April 6. Oil prices held their gains despite the extension, with markets signalling scepticism that a resolution was imminent.
The oil shortfall caused by this crisis is around 10 million barrels a day, roughly equivalent to how much demand dropped during the worst of the COVID-19 pandemic, according to analysts at Wood Mackenzie, who noted that the full effects of the Strait’s near-total closure have yet to reach consumers.
Oxford Economics has identified $140 per barrel as the threshold at which the global economy tips into mild recession, reducing world GDP by 0.7% by year-end and pushing the United Kingdom, the Eurozone and Japan into contraction.
The Macquarie note observed that markets were still pricing in a swift resolution, with oil futures heavily backwardated. However, the firm warned that given uncertainty over what a ceasefire would look like and continued attacks on energy infrastructure, prices may need to climb further before a deal becomes viable for both sides.
