With greater than 80 million tonnes every year (mtpa) of liquefied pure gasoline (LNG) provide, representing round 20% of world provide, being inaccessible to world markets, the Strait of Hormuz closure has the potential to spark the most important vitality provide shock in many years, in line with Wooden Mackenzie, an vitality intelligence group, which emphasizes that oil costs might attain $200 a barrel (bbl) in a worst-case situation, as over 11 million barrels per day (b/d) of Gulf crude and condensate provide continues to be curtailed.
Wooden Mackenzie’s new Horizons report highlights {that a} extended closure of the Strait of Hormuz poses the only biggest menace to world vitality markets in many years, whereas outlining three distinct eventualities: ‘Fast Peace,’ ‘Summer season Settlement,’ and ‘Prolonged Disruption,’ which supply a unique timeline for ending the battle and reopening the waterway, because the agency assesses the potential affect on oil and gasoline provide, costs, vitality demand, and the broader world financial system.
Peter Martin, Head of Economics at Wooden Mackenzie, commented: “The Strait of Hormuz is essentially the most essential chokepoint in world vitality markets, and a chronic closure would develop into excess of an vitality disaster. The longer disruption persists, the larger the affect on vitality costs, industrial exercise, commerce flows and world financial development.”
Throughout the ‘Fast Peace’ situation, a workable peace settlement is reached within the close to time period, and the Strait reopens by June, enabling the worldwide financial system to broadly return to its pre-war trajectory by This autumn 2026. Because of this, crude costs find yourself falling sharply following a deal, with Brent easing to round $80/bbl by the tip of 2026 and declining additional to $65/bbl in 2027 because the oil market returns to oversupply.
The vitality intelligence group underlines that on this situation, world GDP development slows from 3% in 2025 to 2.3% in 2026, with a recession restricted to the Center East, as the worldwide financial system will get again to its pre-conflict trajectory by This autumn 2026.
The agency’s ‘Summer season Settlement’ situation assumes the ceasefire holds, however negotiations lengthen into late summer time, with the Strait remaining largely closed till September. On this oil and LNG provide shortages persist by Q3 2026, driving a shallow world recession in H2 2026, whereas world GDP development falls beneath 2% in 2026, leading to modest but everlasting financial scarring in comparison with the pre-war baseline.
Below ‘Prolonged Disruption,’ which is the corporate’s most extreme situation, the Strait of Hormuz stays largely closed by the tip of 2026, with recurring tensions triggering intervals of renewed battle and sustained provide disruption. Wooden Mackenzie’s evaluation signifies that Brent crude costs might strategy $200/bbl by the tip of 2026, regardless of world oil demand falling by 6 million b/d year-on-year in H2 2026.
This evaluation factors out that greater than 11 million b/d of crude and condensate manufacturing stays shut in and world oil inventories proceed to say no, as diesel and jet gas costs might rise in direction of $300/bbl in main refining facilities by year-end, whereas the worldwide financial system might contract by as a lot as 0.4% in 2026, marking the third world recession this century, with vital financial scarring.
WoodMac elaborates that oil and gas-importing nations might intensify efforts to cut back their import dependence by aggressively pursuing sooner electrification, with the regional financial affect probably being extreme and uneven, because the Center East might see GDP contract by 10.7% in 2026. Whereas EU27 GDP declines by 1.5% in 2026 and 0.5% in 2027, and U.S. GDP development falls beneath 1% in each years, China’s GDP development slows to three% in 2026.
Alan Gelder, Senior Vice President for Refining, Chemical compounds & Oil Markets at Wooden Mackenzie, famous: “The long-term outlook factors to structurally weaker oil costs than in our pre-conflict base case if importing nations speed up efforts to cut back oil dependence.
“If electrification advances extra aggressively and oil imports are displaced, this may add additional downward stress on costs, with Brent probably trending US$10/bbl decrease than the fast peace situation within the medium/long-term. This outlook is, nevertheless, challenged by each the tempo of the vitality transition and better vitality prices for oil-importing economies that search to cut back reliance on hydrocarbons.”
LNG market in retailer for extended disruption
Wooden Mackenzie’s report finds that the worldwide LNG market faces various levels of disruption underneath every of the three eventualities, with ‘Fast Peace’ declaring that LNG markets stay tight by summer time 2027, as Gulf export amenities recuperate steadily and development delays gradual the subsequent wave of provide development from the area.
The corporate underscores {that a} main world LNG enlargement stays underway, with provide anticipated to extend by round 200 mtpa by 2031, roughly 50% above present ranges, however the anticipated oversupply is predicted to be delayed quite than eradicated.
The agency expects that U.S. LNG cargo cancellations could ultimately be required to rebalance the market, with European TTF costs within the early 2030s nearly half of 2026 ranges of round $14/mmbtu, however costs are then anticipated to stage a restoration by to 2035.
Below WoodMac’s ‘Prolonged Disruption’ situation, the market outlook turns into considerably extra extreme, with a number of the Gulf area’s current 85 mtpa of LNG provide probably completely misplaced, whereas round 75 mtpa of capability that’s presently underneath development faces multi-year delays. Because of this world LNG provide may very well be on common 70 mtpa decrease than anticipated earlier than the battle.
Massimo Di Odoardo, Vice President of Fuel and LNG Analysis at Wooden Mackenzie, acknowledged: “Persistent provide uncertainty would speed up efforts to diversify away from imported LNG, supporting coal resilience and sooner development in renewables and electrification throughout Asia and Europe.
“LNG costs would stay elevated by to 2030 supporting investments in new LNG exterior the Gulf, however decrease long-term demand would danger undermining the business’s future views.”
Additional vitality market fragmentation on the playing cards
Wooden Mackenzie suggests {that a} extended battle might speed up structural adjustments throughout world vitality markets past the speedy provide shock, as intermittent disruption might proceed even after the Strait of Hormuz reopens, reinforcing the geopolitical danger connected to each oil and LNG commerce flows, making a extra risky pricing atmosphere, and growing stress on import-dependent economies to strengthen vitality safety.
Inside the ‘Prolonged Disruption’ situation, the agency’s evaluation signifies that nations throughout Europe and Asia intensify efforts to cut back hydrocarbon dependence by accelerated electrification. Concurrently, resource-rich producers exterior the Gulf, together with U.S. LNG exporters, profit from rising demand for provide diversification.
The corporate’s report spotlights the rising strategic significance of essential minerals provide chains, as sooner electrification and renewable deployment drive stronger demand for metals wanted throughout clear vitality applied sciences.
Martin concluded: “The implications of an prolonged disruption would lengthen properly past vitality markets. It could take a look at the resilience of world commerce, industrial provide chains and financial development concurrently, reinforcing the urgency of attaining a decision.”
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