Hormuz Crisis Chokes Oil Supply, $200 Price Looms

A closed Strait of Hormuz, stemming from the Middle East war, has choked off an estimated 20% of global oil supply, leading to a staggering $38 per barrel premium for physical Dubai crude over its paper equivalent. This massive disruption has prompted Gulf producers to slash output by at least 10 million barrels per day and shut over 3 million barrels per day of refining capacity. While the International Energy Agency announced a record 400 million barrel emergency stock release, its impact will be delayed (120 days for the U.S. portion) and insufficient to offset losses, especially for non-IEA members like China and India.

These Asian nations, already with low stockpiles, face severe feedstock shortages, prompting refiners to consider run cuts and compete fiercely for limited Russian crude. Analysts now project Brent Crude could hit $150 per barrel in weeks, with some forecasting $200 by 2026, underscoring a fundamental supply loss unlike previous disruptions.

Despite U.S. administration efforts to calm markets, the physical reality points to sustained price pressure and a global shortfall, particularly in middle distillates for regions like Europe.