- The Strait of Hormuz is critical for global oil supply amid Israel-Iran tensions
- Iran produces 3.3 million barrels daily, about 3% of global oil supply
- Disruption of Iranian oil could raise crude prices by 9-15% from supply shock
The Strait of Hormuz has snapped into focus after Israel's strike on Iran, with crude oil prices at risk of vaulting to USD 95 to USD 110 per barrel if Tehran retaliates by disrupting supply through the world's most critical energy chokepoint, according to a report by Equirus Securities.
Equirus warned that Iran's nearly 3.3 million barrels per day of production, about 3 per cent of global supply, sits at the centre of the current escalation. Assuming a 3 to 5 per cent price response for every 1 per cent supply shock, a disruption of Iranian barrels alone could translate into a 9 to 15 per cent rise in crude prices.
On a base price of USD 70 per barrel, that would mean an increase of roughly USD 6 to 11, pushing oil toward USD 76 to 81 purely on direct supply loss.
But the report underscored that markets do not price conflict in a mechanical fashion. If tensions threaten traffic through the Strait of Hormuz, the premium becomes structural rather than proportional. Even the risk of partial disruption could embed a USD 20 to 40 per barrel geopolitical premium, reopening a pathway toward USD 95 to USD 110 and beyond.
Crude has already climbed about 10 per cent since the United States began positioning military assets in the Middle East, reflecting what the report described as headline driven geopolitical risk.
The Strait of Hormuz carries a significant share of global seaborne oil and liquefied natural gas flows, making it a strategic lever in any confrontation involving Iran.
Crisis Group in a report says Tehran has multiple response options short of a declared closure. These include stepped up harassment of tankers, temporary navigational restrictions during military drills, drone overflights and boarding incidents aimed at raising insurance and freight costs while avoiding an outright blockade.
Iran could also slow or intermittently restrict traffic to send a market signal. A sustained closure would disrupt global energy trade on a massive scale and likely trigger a US led naval response, while also constraining Iran's own exports.
Equirus said oil markets typically embed a geopolitical premium during initial escalation before adjusting as trade flows reroute and supply fundamentals reassert themselves.
