Strait of Hormuz Closure Risks Greatest Global Energy Supply Shock in Decades
A prolonged closure of the Strait of Hormuz poses the single greatest threat to global energy markets in decades, according to a new Horizons report from Wood Mackenzie, Strait Talking: Iran War Scenarios and the Future of Energy.
Impact on Energy Markets
More than 11 million barrels per day (b/d) of Gulf crude and condensate production is currently curtailed. Meanwhile, over 80 million tonnes per annum (Mtpa) of LNG supply, equivalent to around 20% of global supply, remains inaccessible to global markets.
Scenarios
Wood Mackenzie has shared three distinct scenarios: Quick Peace, Summer Settlement and Extended Disruption. Each scenario offers a different timeline for ending the conflict and reopening the Strait and assesses the potential impact on oil and gas supply, prices, energy demand and the broader global economy.
- Quick Peace: A workable peace agreement is reached in the near term, and the Strait reopens by June. Crude prices fall sharply following a deal, with Dated Brent easing to around US$80/bbl by end-2026.
- Summer Settlement: The ceasefire holds but negotiations extend into late summer, with the Strait remaining largely closed until September. Oil and LNG supply shortages persist through Q3 2026, driving a shallow global recession in H2 2026.
- Extended Disruption: The Strait remains largely closed through the end of 2026, with recurring tensions triggering periods of renewed conflict and sustained supply disruption. Brent crude prices could approach US$200/bbl by end-2026, despite global oil demand falling by 6 million b/d year-on-year in H2 2026.