Three Oil and Gas Crisis Scenarios Due to Iran War
During the last week of May 2026, Brent crude prices briefly fell to $103-104 per barrel. The decline was not due to fundamental supply changes, but rather hopes that US-Iran talks mediated by Pakistan showed ‘some progress’. Markets always respond quickly to good news. However, in energy crises, prices can drop rapidly while supply risks take weeks to fully subside. As long as the Hormuz Strait remains under pressure, global energy supply risks remain high.
Hormuz is not merely a regional shipping route. Around one-fifth of global oil and petroleum product consumption, a quarter of global maritime oil trade, and nearly one-fifth of global LNG trade pass through the strait. Therefore, disruptions to Hormuz extend beyond oil prices, affecting gas, fertiliser, food, inflation, logistics costs, and the economic stability of energy-importing nations.
The following three scenarios are not single predictions but a risk map. Differences depend on three variables: duration of Hormuz disruption, whether US-Iran diplomacy yields concrete agreements, and whether the conflict remains limited or escalates into a regional war. Domestic political calendars, including US mid-term elections, are not primary variables as they only affect timing, not the underlying logic of each scenario.
Scenario A (Moderate) – Limited Disruption
Late May-June 2026, Brent: US$115-130/barrel, Effective supply loss: 2-5 million bpd
This is the most plausible scenario: no major diplomatic breakthroughs, but no total ceasefire collapse either. Iran does not need to fully close Hormuz; merely making shipping feel unsafe suffices.
Some vessels detained, leading to higher insurance premiums, longer transit times, and delayed shipments. In energy markets, even a few days’ delay on such a critical route can translate into price premiums.
Effective supply loss in this scenario ranges from 2-5 million barrels per day. The term ‘effective’ is key, as the loss isn’t always physical production from wells. What’s disrupted is the ability to deliver oil to buyers on time with reasonable costs and risks.
Brent prices could rise to US$115-130 per barrel. This increase primarily reflects geopolitical risk premiums, not full physical shortages. Strategic reserves and additional supply from other producers can help, but only partially: enough to prevent supply panic, not enough to return prices to pre-crisis levels.
This is a scenario of ‘expensive, but not yet system-breaking’.
Scenario B (Severe) – Prolonged Closure
July-September 2026, Brent: US$140-180/barrel, Effective supply loss: 10-15 million bpd
The second scenario is far more severe. It occurs if US-Iran negotiations stall and Hormuz disruptions extend beyond mid-year. At this point, markets no longer view Hormuz as a temporary risk but a real supply constraint.
Iran doesn’t need to announce a Hormuz closure. In energy markets, credible threats alone often prompt vessels to wait and insurers to raise premiums. If threats of sea mines, missiles, drones, or ship attacks are credible, many operators and insurers will delay, reroute, or impose extreme cost increases.
Unlike Scenario A, markets no longer just factor in risk premiums. They begin accounting for oil that fails to reach the market entirely.
Major Hormuz disruptions could force Gulf states to shut in production close to 10 million barrels per day. Factoring in alternative routes, strategic reserves, and demand adjustments, global effective supply loss in this scenario could range from 10-15 million barrels per day.
With such pressure, Brent could rise to US$140-180 per barrel. This is no longer just an oil price spike. Impacts spread to Qatar LNG, spot gas prices in Asia and Europe, and fertiliser and food supply chains. Energy-importing nations face a perfect storm: rising energy costs, higher food prices, and shrinking fiscal space.
If disruptions persist into September, Europe’s winter preparations for Q4 will begin amid tight global LNG markets. Central banks face a classic dilemma: curb energy inflation or prevent growth from collapsing too sharply.
This scenario is no longer a price disturbance; it marks the start of a supply crisis.
Scenario C (Extreme) – Regional Escalation
October-December 2026 and beyond into 2027, Brent: above US$200/barrel, Effective supply loss: 18-25 million bpd
The third scenario is extreme. It should not be treated as a base case but must not be ignored. In regional conflicts, the greatest risks often stem from miscalculations, retaliatory strikes, and emergency decisions made when all parties feel unable to retreat.
This scenario unfolds if the Hormuz crisis escalates into a regional conflict. Houthi attacks in the Red Sea intensify. Iraq’s Basra export terminals are disrupted. Saudi Arabian or UAE oil infrastructure becomes a target. Tankers no longer worry only about Hormuz but also alternative routes previously considered safe.
In such conditions, the world faces simultaneous disruptions across multiple key energy nodes.
Effective supply loss could reach 18-25 million barrels per day. This figure is extreme and only plausible if disruptions include Hormuz, the Red Sea, Basra, parts of Gulf export infrastructure, and crippled logistics capacity due to insurance and security risks.
Brent prices in such a scenario could surge beyond US$200 per barrel.