Closure of the Strait of Hormuz, Energy Analyst: Global Oil Prices Could Reach $100 a Barrel
NEW YORK, KOMPAS.com - The global oil market is now on edge over potential supply disruptions after a weekend US strike on Iran rekindled fears of disrupted oil distribution through the Strait of Hormuz, a vital artery of the world’s energy trade.
Head of Energy Research at MST Marquee, Saul Kavonic, says the possible scenarios are varied.
From limited disruptions to Iran’s oil exports to the most extreme scenario of a total closure of the Strait of Hormuz.
For the global market, the biggest risk is not only the loss of supply from Iran but the disruption of the entire flow of oil shipments passing through the strait.
He cited early indications pointing to a broader-scale attack on Iran, which could trigger retaliation and draw other Gulf states into the conflict.
In such a condition, the market would begin pricing in a range of risks, from reductions of up to 2 million barrels per day of Iranian exports, attacks on regional energy infrastructure, to the possibility of disruptions to shipping through the Strait of Hormuz.
“If the regime in Iran feels existentially threatened, attempts to block the Strait of Hormuz cannot be ruled out,” he said.
Kavonic also noted that if Iran feels under serious threat, attempts to block the Strait of Hormuz would not be impossible.
Nevertheless, the United States and its allies are expected to deploy military escorts to keep the shipping lanes open.
The closure of the Strait of Hormuz would have a very large impact on global energy markets.
Oil prices could surge to triple digits or above $100 per barrel, while liquefied natural gas (LNG) prices could again hit record highs as in 2022.
“This could create a scenario three times worse than the Arab oil embargo and the Iranian Revolution of the 1970s, and push oil prices to three digits ($100 per barrel), while LNG prices again test the 2022 record highs,” Kavonic said.
Over the past weekend, Brent crude closed at $72.48 per barrel, bringing year-to-date gains to around 19 per cent.
Meanwhile, West Texas Intermediate (WTI) closed at $62.02 per barrel, up about 16 per cent since the start of the year.