If oil and gas infrastructure is attacked, oil prices may surge to $120! The key going forward lies in the Strait of Hormuz.

Disruptions in shipping through the Strait of Hormuz are repricing the oil market as a “geopolitical shock priority” market. The consensus among several investment banks is that the key risk lies not in whether OPEC+ has spare capacity, but in whether these incremental volumes can pass through the Strait; if restricted passage persists, the upward potential for oil prices will open up rapidly.

Brent crude jumped as much as 13% at Monday's opening, surpassing $82 per barrel, and was quoted at $78 per barrel at the time of writing. The market is preparing for longer-term volatility and supply chain disruption. Over the weekend, as U.S. and Israeli strikes against Iran escalated into a regional conflict, tanker traffic in the Strait nearly came to a standstill.

Iran claims the waterway remains open, but also stated that it was responsible for attacks on three tankers on Sunday. After the U.S. designated a maritime warning zone, owners generally suspended crossings through this “throat route.” About one-fifth of the world's crude oil and liquefied natural gas is normally transported daily via the Strait of Hormuz, making any delays likely to quickly translate into a risk premium.

Against this backdrop, Citi has raised its short-term Brent forecast to $85 and warns that if regional oil and gas infrastructure is struck, there is a tail risk that oil prices could surge to $120. HSBC emphasizes that the strait is the “main variable” of oil market risk; if it is closed, the spare production capacity from the Middle East Gulf will not be able to serve as a stabilizer due to transport constraints.

Citi: Anchored at $80-90 dollars short-term, infrastructure-hit scenario could rush to $120

Citi has raised its short-term Brent forecast by $15 to $85. The bank expects, under conditions of sustained risk to energy infrastructure and “disrupted” oil flow via the Strait, Brent will likely trade in the $80 to $90 per barrel range this week.

Citi’s “base case” is cooling of the conflict within 1-2 weeks, triggered by changes in Iran’s leadership or the U.S. opting to de-escalate after seeing leadership changes and weakening Iran’s missile and nuclear programs. In more aggressive scenarios, if regional oil and gas infrastructure is hit, oil prices could rise to $120 per barrel, with Citi assigning a 20% probability to this scenario.

The latest news reports that Saudi Arabia’s Ras Tanura refinery was shut down after a drone attack. According to Xinhua News Agency, Al Jazeera reported on the 2nd, quoting the Iranian military, that three British and American tankers were attacked in the Persian Gulf and Strait of Hormuz.

According to Saudi Aramco, Ras Tanura is the largest refinery in the Middle East with a daily refining capacity of 550,000 barrels.

HSBC: Risk is "asymmetric," if the Strait is blocked, spare capacity cannot reach the market

HSBC's research report on February 27 assessed that Iran-related risks to oil prices are “asymmetrically” distributed, with most escalation scenarios pointing towards price increases. Passage through the Strait of Hormuz is the “main concern.”

HSBC notes the Middle East Gulf's spare capacity is “significant”—OPEC’s total is about 4.6 million barrels per day, distributed across Saudi Arabia, UAE, Iraq, Kuwait, and Iran. But if the strait is closed, much of this capacity will not enter the market.

About 19-20 million barrels of oil equivalent pass through the strait daily. Alternative routes cannot fully offset the impact of a Strait closure. HSBC lists the bypass capacity, such as Saudi Arabia’s East-West pipeline (5-7 million barrels/day) and UAE’s Adcop pipeline to Fujairah, but overall cannot cover the volume the strait carries.

HSBC estimates that about 19% of global supply (crude and refined products) needs to pass through the Strait of Hormuz; even a “brief” disruption could raise prices. In the scenario of “military escalation and Iranian retaliation,” Brent could surge to $80.

Secondary shock in shipping and refined products: not just crude, risk premium spreads down the chain

HSBC warns that the Hormuz risk affects not only crude oil but also refined products. About 10% of global diesel supply and 20% of jet fuel supply rely on traversing the Strait of Hormuz. Tensions have already pushed up middle distillate prices, and if disruptions persist, some products may face episodic shortages.

Transit data shows Hormuz’s “volume constraint” explains why the market is extremely sensitive to shipping delays.

Gao Mingyu, Chief Researcher of Energy & Chemical at the Citic Futures Research & Development Department, stated that in 2025, Persian Gulf nations will export a total of 18.67 million barrels/day of crude oil and refined products via the Strait of Hormuz, accounting for 27.1% of world total, of which crude oil and condensates are 15.007 million barrels/day, accounting for 34.5% of global total.

JPMorgan warning: If the strait is blocked, storage constraints may force a full production shutdown of Middle East crude

According to previous reporting from Wallstreetcn, JPMorgan has conducted detailed calculations for the storage capacity of the seven Gulf oil-producing countries—Saudi Arabia, UAE, Iraq, Kuwait, Qatar, Oman, and Iran.

The bank estimates that these countries’ onshore crude oil storage capacity is about 343 million barrels, sufficient for about 22 days of stranded production. Additionally, roughly 60 empty tankers in the Gulf provide an extra offshore storage buffer for about 50 million barrels, extending production for another 3-4 days.

Combined, Middle East oil producers can sustain normal production for only about 25 days if the strait is fully blocked. Once this limit is exceeded, storage facilities will reach saturation, leaving oil producers with no choice but to forcibly cut or even halt production.

This assessment means that if the situation continues to deteriorate, the global energy market will face not only price shocks but also the physical interruption of actual supply.

The underlying “supply surplus” remains, but short-term trading framework has been rewritten

Despite the oversupply situation expected for 2026, the center and volatility range of prices in the short-term trading framework has already shifted significantly higher.

Goldman Sachs analyst Daan Struyven notes that the current risk premium of about $18 per barrel is equivalent to pricing in the impact of a complete six-week shipping shutdown.

His calculation: if the strait is closed for a month, crude oil rises by $15/barrel; if the entire 4 million barrels/day of backup pipeline capacity is used, the increase narrows to $12/barrel; if further matched with a release of 2 million barrels/day from global SPR, the increase shrinks to $10/barrel.

Rystad Energy’s Head of Geopolitics Jorge Leon states, if the Strait of Hormuz remains disrupted for weeks or months, the scenario of $100/barrel is entirely possible; the actual effect of OPEC+ production increase plans may be extremely limited, since the incremental supply also needs to be shipped out via the strait.

Wood Mackenzie Senior Vice President of Refining, Chemicals, and Oil Markets Alan Gelder also points out that even if OPEC+ announces an increase starting in April, as long as the waterway remains shut, both new and existing spare capacity would be unable to reach the market.

Citic’s Gao Mingyu states that Brent crude’s upward cycle may last about 2 weeks, 1 month, and 2-4 months, with target levels at about $77/barrel, $80-85/barrel, and $90-100/barrel respectively.

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