The increasing military tension between the US and Iran has created a stir in the global oil market. Iran has threatened to close the Strait of Hormuz, a vital route for about 20% of the world’s crude oil supply. A large quantity of LNG also passes through this route. If this route is stopped, it could have a negative impact on global supply.
Brokerage’s dangerous estimate
DBS Bank has warned that if the Strait of Hormuz is completely closed, Brent crude prices could reach $100 to $150 a barrel. Goldman Sachs says if supplies remain stagnant for five weeks, prices could reach $100. Meanwhile, Brent crude is already up 13% to more than $82 a barrel, its highest level since January 2025. JPMorgan Chase and Bernstein also said that if this fight continues for a long time, the price could rise above $100.
Big impact on emerging countries including India
India depends on this route for about 50% of its oil imports. About 2.6 million barrels of oil flows through Hormuz every day. Prolonged supply disruption could be very bad for import dependent countries like India. According to ING Group, just a 10% increase in oil prices could increase the current account deficit of emerging economies by 0.40 to 0.60 percent. This will put pressure on both inflation and economic growth.
Are strategic reserves not enough?
The US could theoretically tap its Strategic Petroleum Reserve, but analysts believe even this move would not be enough to cover losses if the crisis escalates. Experts say that the direction of oil prices currently completely depends on the US-Iran tension. Until there are clear signs of normalization, crude oil prices may remain high and market volatility may remain.
