Oil could hit $200 if Hormuz stays shut, warns S&P Global as West Asia war disrupts oil flows

Crude oil prices have surged sharply as tensions in West Asia intensify, with Brent crude now trading around $125 per barrel, its highest level since 2022. The market remains focused on the Strait of Hormuz, through which nearly 20% of global oil flows, as the ongoing US–Iran standoff continues to raise fears of a prolonged supply shock.

Speaking to CNBC-TV18, Dave Ernsberger, President of S&P Global Energy, warned that the market impact could deepen significantly if disruptions persist. “We estimate that around one billion barrels of oil have effectively been removed from the global market in the past 60 days,” he said, adding that if the Strait of Hormuz remains closed for another two months, “prices could rise towards $200 per barrel.” He said the key uncertainty is whether the conflict ends quickly or continues indefinitely, noting that current incentives do not appear to favour a near-term resolution.

The escalation has been driven in part by geopolitical signalling from Washington and Tehran. US President Donald Trump has warned that the naval blockade of Iranian exports could last “months,” reinforcing expectations that Washington is prepared to tolerate higher oil prices as part of its broader strategic objectives. Iran, meanwhile, has resisted pressure to concede on its nuclear programme, further hardening the deadlock.

Carole Nakhle, CEO of Crystol Energy, said the current price action is being driven more by politics than physical shortages. “What is happening in the Strait of Hormuz—the political aspect—is what is driving oil prices today,” she said. While she noted that alternative export routes are helping offset some disruption, she added that escalating rhetoric on both sides is keeping markets on edge and sustaining the risk premium in crude.

She also said the US approach signals tolerance for higher prices in the short term. “It is easier for them to say that because they are the biggest oil-producing country in the world,” Nakhle said, referring to Washington’s position, adding that the broader market is being forced to absorb uncertainty until a political resolution emerges.

Vandana Hari, Founder and CEO of Vanda Insights, described the market as caught between two extreme outcomes, with traders struggling to price risk. She said the situation has become a “war of attrition” with both sides unwilling to back down. “There is a lot of volatility because the market is essentially flying blind between two extreme outcomes—either a return to negotiations or renewed hostilities,” she said.

Hari added that Brent’s recent spike towards $125 reflects heightened sensitivity to headlines, including concerns over shipping through the Strait of Hormuz. She noted that even a partial reopening of the waterway could trigger relief in markets, with prices potentially easing back towards $80 per barrel if stability is restored.

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Despite the sharp rally, most brokerages still expect crude to average around $80–90 per barrel over the medium term, assuming disruptions ease. However, risks remain skewed heavily to the upside, with extreme scenarios—such as a prolonged blockade of the Strait of Hormuz—seen capable of pushing prices towards $140–150 or even higher, depending on the duration and severity of the disruption.

The market outlook now hinges on whether diplomatic channels can reopen or whether the conflict escalates further, keeping energy markets on a knife’s edge.