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As the closure of the Strait of Hormuz, through which 15% of global oil and 20% of global liquefied natural gas (LNG) supply flows, evokes fears of a major energy shock, analysts at Wood Mackenzie, an energy intelligence group, have warned that oil prices could surge past $100 a barrel (bbl), if flows are not restored, echoing the price spikes seen during the onset of the Russia-Ukraine conflict.
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Following the U.S. and Israeli strikes on Iranian government, military and nuclear facilities, Iran warned ships away and insurers withdrew coverage, halting tanker traffic. Wood Mackenzie believes that higher oil and gas prices are certain as the closure of the Strait of Hormuz threatens to disrupt 15% of global oil supply and 20% of global LNG supply, with oil prices potentially exceeding $100/bbl.
As a result, the energy intelligence group claims that the disruption creates a dual supply shock, with current exports through this critical waterway halted and OPEC+ – encompassing Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman – additional volumes and ultimately most of OPEC’s spare capacity, typically seen as a key lever for balancing the global oil market, perceived to be inaccessible while the waterway remains closed.
Given the situation in the Strait of Hormuz, the International Chamber of Shipping, European Shipowners (ESCA), and the Asian Shipowners’ Association, issued a joint statement and stated: “We were deeply concerned to learn about the attacks on seafarers and the tragic loss of life. Our thoughts are with the families of those affected. All parties must take all necessary steps to safeguard the safety of seafarers who are simply going about their job and have found themselves, through no fault of their own, in a highly volatile situation.
“This is a fast moving and unpredictable situation. It is crucial the entire industry only relies on verified information from trusted sources. We strongly urge all ships operating in the region to conduct thorough risk assessments and to maintain vigilance in line with the latest BMP (Best Management Practices) Maritime Security guidelines. Ship operators should continue to monitor and act upon updates issued by official state channels.”
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Regarding OPEC+’s previously announced plans to unwind production cuts, WoodMac explains that the move may prove irrelevant if exports remain blocked, with alternative routes, such as Saudi Arabia’s East-West pipeline to the Red Sea and additional Iraqi volumes via the Mediterranean, deemed to not be able to fully offset the disruption.
Alan Gelder , SVP of Refining, Chemicals and Oil Markets at Wood Mackenzie, commented: “The key question is when do vessels re-establish export flows. No doubt, tanker rates and insurance will increase dramatically, but these costs would only be a small part of the oil price impact associated with a curtailment of oil flows if they last for more than a few days.”
While strategic stock releases could provide partial relief, the company is convinced that global spare capacity is effectively trapped behind the Strait. Given that the group of eight OPEC+ countries responsible for voluntary production cuts agreed to resume unwinding the April 2023 1.65 million b/d cut, Wood Mackenzie underlines they will bolster production by 206,000 b/d in April and meet again on April 5 to assess next steps.
Gelder added: “The OPEC+ decision does not come as a surprise, due to the uncertainty surrounding the US-Iran tensions, and that the market for non-sanctioned crudes is tight. There is, however, a risk that the OPEC+ decision is moot if flows do not resume through the Strait of Hormuz.”
Wood Mackenzie is adamant that gas markets are facing equal turmoil, as Qatar’s LNG exports, covering nearly 20% of global supply, are stranded, reigniting competition between Asia and Europe for cargoes. European storage levels are said to be already below seasonal norms, which ups the risk of prolonged tightness even after flows resume.
The situation is further compounded by precautionary shutdowns of Israel’s Leviathan and Karish gas fields that sent more than 10 bcm to Egypt last year and potential Iranian export disruptions to Türkiye, accounting for more than 7 bcm in 2025, which are interpreted to add further strain, as Egypt would likely increase LNG imports to offset lost volumes.
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Arsenio Dominguez , Secretary-General of International Maritime Organization (IMO), stated: “I am deeply concerned by reports that several seafarers have been injured in attacks on merchant vessels. No attack on innocent seafarers or civilian shipping is ever justified. These crews are simply doing their jobs and must be protected from the effects of wider geopolitical tensions. Freedom of navigation is a fundamental principle of international maritime law, and it must be respected by all Parties, with no exception.
“I am monitoring the situation closely, and I urge all shipping companies to exercise maximum caution. Where possible, vessels should avoid transiting the affected region until conditions improve. I also call on all stakeholders to remain vigilant against disinformation and to rely only on verified, authoritative sources when making navigational decisions.”
Gelder is under the impression that it could take a few weeks for export flows to re-establish themselves in “the most optimistic scenario,” in which the Iranian regime would decide to co-operate with the United States.
“During that time, oil prices are heavily risked to the upside. The most recent comparison is during the early days of the Russia/Ukraine conflict, when the fear of loss of Russian supplies drove the oil price to over US$125/bbl,” he emphasized while highlighting that oil prices over $100/bbl would be possible if transit flows do not get re-established quickly.
Massimo Di Odoardo , Vice President, Gas and LNG Research at Wood Mackenzie, underscored: “Disruptions to LNG flows would reignite competition between Asia and Europe for available cargoes, particularly at a time when European storage levels are below seasonal norms and around 10% lower than at the same point last year, following a severe cold spell in January.
“With approximately 1.5 Mt (2.2 bcm) of LNG exports at risk for each week that flows through the Strait of Hormuz are halted, both Asian and European markets would need to draw more heavily on existing storage and would increase the need for restocking over the summer. This would tighten market conditions well beyond the eventual resumption of trade through the Strait.”
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WoodMac is adamant that a halt in LNG flows through the Strait of Hormuz would be equally disruptive for global gas and LNG markets, underlining that around 81 Mt (110 bcm) of LNG transited the Strait in 2025, primarily from Qatar, accounting for nearly 20% of global LNG supply.
Di Odoardo continued: “This time, however, the reaction is unlikely to be as extreme. Unlike the prolonged disruption of Russian pipeline flows, a blockage in the Strait could be viewed as temporary, tempering the upside. Still, Monday will see a dramatic price jump at market opening, and any signal that disruptions could drag on would add further fuel to the rally.”
The latest energy crisis brings comparisons to the 1970s oil embargo. Even though the current less oil-intensive global economy would require prices above $200/bbl to replicate the same shock, Wood Mackenzie notes that markets are bracing for a dramatic surge as uncertainty over the duration of the closure fuels volatility.
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Gelder concluded: “The nearest historical analogue in our view is the Middle East oil embargo of the 1970s, which increased oil prices by 300 percent to around US$12/bbl in 1974. That is only US$90/bbl in 2026 terms. Eclipsing this in today’s market concerned about significant losses of supply seems very achievable.
“The global economy is now far less oil intensive than 50 years ago. The shock at the time of the oil embargo was the pace and scale of the price increase. Oil prices would need to reach well over US$200/bbl to exert a similar level of shock to today’s global economy.”
about 4 months ago
As the closure of the Strait of Hormuz, through which 15% of global oil and 20% of global liquefied natural gas (LNG) supply flows, evokes fears of a major energy shock, analysts at Wood Mackenzie, an energy intelligence group, have warned that oil prices could surge past $100 a barrel (bbl), if flo
