What Analysts Say Could Happen to Oil Markets if the Strait of Hormuz Remains Closed

The Scale of Potential Supply Loss

Financial institutions warn that the disruption could remove enormous volumes of oil from the market if it continues for months.

Some analysts estimate that around 10 million barrels per day of supply could be lost under severe disruption scenarios, according to commentary cited by UBS.

Others note that the cumulative supply loss could rapidly become massive. Market commentary linked to Morgan Stanley indicates that the market has already absorbed nearly one billion barrels of lost supply during the crisis so far, largely because inventories and other buffers initially cushioned the shock.

Citigroup‑linked analysis suggests the total inventory drawdown could exceed 1.3 billion barrels if the disruption persists.

The Hidden Risk: Inventories Falling Toward Operational Minimums

Early in an oil crisis, global stockpiles often soften the blow. Governments and companies draw down stored crude to keep refineries supplied and prevent shortages.

But analysts warn this buffer is temporary.

Once inventories fall close to “operational minimum” levels, the oil system becomes far less flexible. Storage facilities, pipelines, and refineries cannot safely operate with tanks completely empty, so markets lose their ability to smooth supply disruptions. When that threshold approaches, prices can jump suddenly rather than rise gradually.

Morgan Stanley has described the current situation as a “race against time,” arguing that the market’s initial buffers may disappear if the Strait remains closed into June.

Why Panic Buying Could Amplify the Crisis

Energy markets are particularly vulnerable to changes in expectations.

If governments or large buyers believe inventories are nearing critical levels, they may try to secure supplies ahead of competitors. This precautionary buying can accelerate the drawdown of available barrels and intensify shortages even if the underlying supply disruption remains unchanged.

While forecasts of specific hoarding behavior are difficult to quantify, analysts broadly warn that tightening inventories and uncertainty about reopening the strait could encourage aggressive buying by import‑dependent nations.

Oil Price Scenarios: $110, $130, $150 — or Higher

Because the Strait of Hormuz handles such a large share of global supply, prolonged disruption could force prices much higher.

Several market scenarios cited by banks and analysts suggest:

• Oil prices could rise toward around $110 per barrel if disruptions persist for another month.
• A deeper physical shortage could push prices into the $100–$130 range or higher as markets reprice supply risk.
• Some analysts warn prices could exceed $130–$150 per barrel if inventories tighten dramatically.

In an extreme scenario, Bank of America commodities analysts have warned that a multi‑month blockade could theoretically send prices above $200 per barrel, although that is considered a worst‑case outcome rather than a baseline forecast.

Why Reopening the Strait May Not Fix the Market Quickly

Even if diplomatic or military efforts reopen the Strait of Hormuz, analysts caution that oil flows may not return to normal immediately.

Several factors could delay recovery:

• Shipping lanes may require mine clearing or security operations before traffic resumes.
• Insurance costs and war‑risk premiums could keep tanker operators away.
• Export terminals and logistics chains may need time to restart.
• Inventories depleted during the disruption would still need to be rebuilt.

Because of these delays, Morgan Stanley has warned that the shutdown has created a “deep air pocket” in the oil market that could keep supplies tight and prices elevated for longer than many expect.

The Bottom Line

The key danger of a prolonged Strait of Hormuz closure is not just the immediate loss of oil exports. It is the possibility that global inventories fall toward critical operating levels, undermining confidence that the market can rebalance.

If that tipping point is reached, analysts warn the oil market could move rapidly from a manageable geopolitical shock to a full physical supply crisis, marked by aggressive buying, shrinking inventories, and sharply higher prices.