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$100 oil? Prolonged Hormuz closure could spark a 1970s-style energy shock
Energy analysts are bracing for a possible oil supply shock after U.S. strikes on Iran reignited fears of disruptions in the Strait of Hormuz.
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$100 oil? Prolonged Hormuz closure could spark a 1970s-style energy shock
Lee Ying Shan@in/ying-shan-lee@LeeYingshan
WATCH LIVE
Key Points
- Analysts warn that a prolonged Strait of Hormuz disruption could push oil prices into triple digits.
- Markets are likely to price in an immediate-risk premium, analysts say.
- The duration of the conflict would determine the severity of any spike, they told CNBC.
- Worst-case scenarios include Gulf infrastructure attacks and a broader regional escalation, experts say.
In this article
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Tankers are seen at the Khor Fakkan Container Terminal, the only natural deep-sea port in the region and one of the major container ports in the Sharjah Emirate, along the Strait of Hormuz, a waterway through which one-fifth of global oil output passes on June 23, 2025.
Giuseppe Cacace | AFP | Getty Images
Oil markets are bracing for a possible supply shock after U.S. strikes on Iran over the weekend reignited fears that flows through the Strait of Hormuz could be disrupted.
Follow CNBC's live coverage of the U.S.-Israel strikes in Iran
While analysts expect an immediate "knee-jerk" reaction to oil prices when trading resumes in New York on Sunday evening, the bigger question is whether tensions could escalate into a sustained interruption of Gulf exports.
"At this point, it seems we are looking at a full-scale military conflict between the U.S. and Iran, which would be unprecedented and the trajectory impossible to assess," said Vandana Hari, CEO of energy research firm Vanda Insights.
"If it carries on for days with Iran and its proxies retaliating to the fullest extent, we are looking at the worst-case scenarios for oil, including a major disruption of oil flows through the Middle East," Hari told CNBC. This is unless the U.S. is able to pre-emptively disarm the Iranian navy and military, as well as ensure tanker traffic through the Strait of Hormuz continues to flow normally.
With tensions escalating, attention has shifted back to the Strait of Hormuz, where any disruption would have immediate and outsized consequences for global oil and LNG flows.
Oil prices year-on-year
Positioned between Oman and Iran, the strait serves as a critical transit route - and potential chokepoint - for global crude, with about 13 million barrels per day moving through it in 2025, equal to approximately 31% of all seaborne oil flows, Kpler data showed.
It links major Gulf producers including Saudi Arabia, Iran, Iraq and the United Arab Emirates to the Gulf of Oman and the Arabian Sea.
Reuters reported on Saturday that an official with the European Union's naval mission, Aspides, said commercial vessels had received VHF radio messages from Iran's Revolutionary Guards warning that "no ship is allowed to pass the Strait of Hormuz."
The official was quoted as saying that Tehran had not formally confirmed any directive to close the waterway.
Early indications are of a broader scale attack on Iran, with counterattacks which could escalate to draw in multiple Gulf countries.
Saul Kavonic
MST Marquee
Reuters noted that Iran has repeatedly threatened over the years to block the narrow passage in response to attacks against the Islamic Republic.
Iran has in the past repeatedly threatened to block the narrow passage in response to attacks against the Islamic Republic.
Bob McNally, president of Rapidan Energy Group, who had advised clients for weeks that conflict was a 75% probability, called it "a very serious development" for the world's oil and gas markets given their dependence on Hormuz production and flows.
The larger question is duration, industry veterans emphasized. The extent of any oil and LNG price spike will depend on the duration and scope of any disruptions to Gulf production and flows, McNally said.
Read more U.S.-Iran news
- Follow CNBC's live coverage of the U.S.-Israel strikes in Iran
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- Iran after Khamenei: What's next and what it means for the country?
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- How the attack on Iran could impact global oil market and economy
- What we know as markets brace for turmoil
The worst-case scenario?: Triple digit oil
Analysts say the potential scenarios range from limited disruptions to Iranian exports to a full blockade of Hormuz.
The nightmare for global markets is not just lost Iranian barrels, but a broader disruption to shipping through the strait.
"Early indications are of a broader scale attack on Iran, with counterattacks which could escalate to draw in multiple Gulf countries," said Saul Kavonic, head of energy research at MST Marquee.
Kavonic said markets will initially price in a spectrum of risks — from the loss of up to 2 million barrels per day of Iranian exports to attacks on regional infrastructure or, in the extreme, a disruption of passage through Hormuz.
"If the Iranian regime feels they face an existential threat, attempts to block the Strait of Hormuz cannot be ruled out," he said, though he added that the U.S. and its allies would likely deploy military escorts to protect shipping lanes.
An infographic titled "Strait of Hormuz" created in Ankara, Turkiye on June 17, 2025.
Anadolu | Anadolu | Getty Images
Should Iran succeed in closing the Strait, the implications for the global oil markets could be severe.
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