Wood Mackenzie warns prolonged Hormuz closure could push oil toward $200

A prolonged closure of the Strait of Hormuz could trigger a severe global energy crisis, potentially pushing oil prices to $200 per barrel by late 2026. Wood Mackenzie's report outlines three scenarios, with the worst-case predicting a significant economic contraction. This warning echoes Iran's own earlier predictions amid escalating regional tensions.

Global crude oil prices could rise to $200 per barrel in the worst-case scenario if the Strait of Hormuz remains closed, warned a report from Wood Mackenzie. Global energy markets have been on edge since the start of the Iran war in February. Oil prices have shot up, sending shockwaves across the globe as worries mount around higher inflation and interest rate hikes.ALSO READ | Iran has destroyed roughly $1 billion worth of US Reaper drones The report mentioned three possible scenarios with different timelines on opening the Strait of Hormuz and the subsequent impact on oil and gas supply, prices, energy demand and the broader global economy. The uncertainty around the Strait has put the supply chains at risk with repercussions that could hit economies hard. More than 11 million barrels per day of Gulf crude and condensate production is currently curtailed, and over 80 million tonnes per annum of LNG supply, which form 20% of global supply, is affected, the report said.ALSO READ | Venezuela third largest supplier of crude to India in May "The Strait of Hormuz is the most critical chokepoint in global energy markets, and a prolonged closure would become far more than an energy crisis," said Peter Martin, head of economics at Wood Mackenzie. "The longer disruption persists, the greater the impact on energy prices, industrial activity, trade flows and global economic growth," he added. Under the most optimistic "Quick Peace" scenario, the warring parties reach a resolution by June, bringing immediate relief for the global economy. Brent crude eases to around $80 per barrel by the end of 2026 and falls further to $65 per barrel in 2027. 'Summer Settlement' scenario assumes the negotiations continuing until late summer, with the Strait largely closed. Oil and LNG shortages persist through Q3 of 2026, with risks of a shallow global recession by the second half of 2026. The worst-case scenario imagines the Strait remaining largely closed through the end of 2026, with bouts of tensions spiralling between the two sides further constraining oil supply. Oil prices could reach $200 per barrel despite global oil demand falling by 6 million barrels per day in H2 2026. The global economy could contract by as much as 0.4% in 2026. Under the Extended Disruption scenario, there will be a renewed push for alternative energy sources, and countries in Asia and Europe could cut down on hydrocarbon use with increased electrification. The report also envisages a positive outlook for US LNG exporters as they benefit from growing demand for supply diversification.(With inputs from ANI)