The Strait of Hormuz, a critical artery for global oil and liquefied natural gas, remains a flashpoint in the ongoing U.S.-Iran conflict. Analysts now warn that if the strait stays closed, oil prices could skyrocket to $200 a barrel, a level never before seen in global markets.
Since the war began last month, U.S. gasoline prices have surged 35%, surpassing $4 a gallon. Countries heavily reliant on Middle Eastern oil are already experiencing fuel shortages, with some implementing emergency measures like school closures and remote work mandates.
'There is no policy option to prevent oil prices from marching up toward $200 a barrel if the Strait of Hormuz remains closed,' said Jason Bordoff, founding executive director of Columbia University's Center on Global Energy Policy.
Experts including those at Eurasia Group and Macquarie predict a 55% chance the war could extend through May, with oil prices potentially exceeding $150 a barrel if Iran targets infrastructure. A prolonged conflict into June could push prices to $200, with a 40% likelihood.
Short-term buffers, such as oil in transit and strategic reserves, have somewhat contained prices, but these cushions are dwindling. Former Secretary of State John Kerry noted that ships escaping the strait before the war are now empty, signaling a tightening supply.
The potential economic impact is severe. Kevin Book of ClearView Energy Partners likened the situation to 2008, when oil prices peaked at nearly $150 a barrel, triggering economic calamity. If the strait remains closed, similar economic turmoil could follow.
This crisis could also accelerate a shift away from fossil fuels, reminiscent of the 1970s energy crisis, which spurred a nuclear boom and reduced oil dependency in U.S. power generation. Bordoff suggests that traumatic experiences from this crisis could lead to lasting changes in energy consumption.