Global Oil Prices Potential to Remain High, Says Morgan Stanley Prediction

Global investment bank Morgan Stanley estimates that the recovery of oil production in the Middle East will not occur instantaneously, even if the strategic Strait of Hormuz shipping lane is reopened. In its latest analysis, Morgan Stanley predicts that Middle Eastern oil production may only recover to 75 per cent of pre-war capacity approximately four months after the Strait of Hormuz returns to normal operations.

This prediction is a major focus for the market, given that the Strait of Hormuz is one of the world’s most critical energy trade routes. Approximately 20 per cent of the global crude oil supply typically passes through the waters near Iran. Currently, the Strait of Hormuz is still considered to be operating below normal levels due to ongoing conflict. This situation has disrupted oil distribution from the Middle East region and triggered market concerns regarding the global energy supply.

Morgan Stanley expects significant changes in oil exports through the Strait of Hormum to only become visible by the end of July. If a peace agreement between the United States and Iran is successfully reached, it is estimated that about three-quarters of the lost production capacity could return within the following four months. However, the path to energy market normalisation is considered long. Morgan Stanley noted several obstacles that must be resolved before oil production and distribution can return to pre-conflict levels.

According to Tip Ranks, these challenges include mine clearance operations in shipping lanes, resolving the backlog of stranded tankers, limited oil storage capacity, and the process of reactivating oil fields impacted by the conflict. Furthermore, the prospects for a permanent peace between the United States and Iran remain uncertain, as both nations continue to engage in missile attacks, showing no signs of easing geopolitical tensions in the region.

This situation has contributed to the strengthening of global oil prices. In trading on 1 June, crude oil prices rose by approximately 3 per cent amid increasing market fears of supply disruptions from the Middle East. The rise in oil prices is also a key focus for investors monitoring major energy company stocks. Several global oil issuers, such as Chevron, Shell, and Occidental Petroleum, are reportedly still receiving ‘buy’ recommendations from market analysts.