Oil prices are likely to remain elevated even after the ongoing Middle East conflict subsides, driven by concerns around the closure of the Strait of Hormuz. Potential disruptions or restrictions in the strait, one of the world’s most critical oil transit chokepoints, continue to pose supply risks.
Beyond that, damage to key energy infrastructure across the region could take time to repair, limiting production capacity in the near term. This perspective is echoed by analysts mentioned in a CNN article and quoted on Yahoo Finance, who believe that oil prices will likely stay elevated.
According to Goldman Sachs projections, per the above-mentioned article, elevated oil prices may remain in place through 2027. Analysts at the investment bank state that historical supply shocks highlight the risks of oil prices staying above $100 for longer, especially in scenarios marked by extended disruptions and sustained supply losses.
The strait remains a vital gateway for Asian economies to meet their energy needs from oil supply from Gulf nations, facilitating the flow of nearly one-fifth of global oil supply. As quoted by CNN and later reported by the above-mentioned Yahoo Finance article, pointing to prolonged uncertainty, a senior Iranian security source stated that the strait will not revert to pre-war conditions.
The post-conflict environment remains highly uncertain, particularly regarding the operational status of the Strait of Hormuz, which could keep risk premiums embedded in oil prices.
Goldman Sachs projects an upward trend in oil prices, noting that prolonged supply disruptions could push Brent above its 2008 peak of roughly $147 per barrel. The investment bank also outlines a severe downside scenario, estimating that Brent could average around $111 per barrel by the last quarter of 202, if oil flows through the strait remain significantly constrained for more than two months and production recovers only to about 2 million barrels per day after reopening.
Iran’s recent attack on Qatar disrupted roughly 17% of its LNG export capacity, dealing a significant blow to global supply. According to QatarEnergy’s CEO, Saad al-Kaabi, as quoted on Reuters, the damage is significant, with repairs likely to keep 12.8 million tons per year of LNG capacity sidelined for three to five years, potentially setting the region’s energy infrastructure back by as much as 10 to 20 years.
Per another Reuters article, attacks on energy infrastructure since the start of the U.S.-Israel war on Iran have realized the energy sector’s worst-case scenario, long-term damage to critical facilities and sustained disruptions to global supply.