If the Strait of Hormuz is completely blocked, will oil prices surge to $200? Deutsche Bank analyzes three scenarios

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The Middle East situation has suddenly escalated, bringing the greatest uncertainty to the global energy market in decades. According to the Pursuit Trading Desk, Deutsche Bank outlined three scenarios for the Strait of Hormuz in its March 2 report. In the most extreme scenario of a complete blockade, Brent crude prices could surge towards $200 per barrel.

According to CCTV News, Iran's Supreme Leader Khamenei was killed in an attack on the morning of February 28. Israel claims that Khamenei and his senior aides, including Ali Shamkhani—Secretary of Iran's Defense Council—and Mohammad Pakpour—Commander-in-Chief of the IRGC—all died in the airstrike. Subsequently, media outlets reported that the IRGC immediately announced the blockade of the Strait of Hormuz and launched strikes on US bases stationed in Qatar, Kuwait, UAE, and Bahrain.

The oil market reacted swiftly to the above events. According to Bloomberg, several commercial vessels received broadcasts from the Iranian Navy stating that passage was prohibited; leading shipping lines including Hapag-Lloyd and Maersk have announced suspensions of Hormuz transits. OPEC+ announced an increase of 206,000 barrels/day in April to ease market tensions.

Deutsche Bank proposed three scenario forecasts for the Strait of Hormuz: if there is a rapid reopening within two weeks, oil prices will fall back to the $70 range; if a partial/fuzzy blockade remains, with attack risks and halted insurance, prices will fluctuate between $80 and $100; if it evolves into a full forced blockade with oil exports completely stopped and OPEC unable to respond, Brent crude may soar to $200. The extent of damage to Kharg Island and the duration of the blockade will be key variables for future assessment.

Key Dynamics in the Oil Market: Export Losses and Real Blockades

Deutsche Bank believes the conflict's direct impact on the oil market centers on several areas.

Damage to Export Facilities: Iran's semi-official Mehr news agency reported explosions on Persian Gulf's Kharg Island. The island is Iran's main offshore oil export hub, with eastern and western terminals. Notably, Israel avoided attacking Kharg Island in 2025.

Blockade Announcement and Shipping Halt: Although US officials say Iran has not yet taken substantive action to block the strait, the British Navy reports "significant military activities" in the Strait of Hormuz, the Gulf of Oman, and the northern Arabian Sea. According to Bloomberg, most commercial vessels have turned around or are waiting at the strait's entrance; commercial shipping is virtually stopped. The UK Maritime Trade Organization (UKMTO) stated Iran's blockade declaration has no legal force under international law, and vessels retain the right to free navigation in international waters.

OPEC+ Output Increase: OPEC+ has confirmed a 206,000 barrels/day increase in April, and Saudi Arabia's February exports are estimated to rise by 440,000 barrels/day from January. However, Deutsche Bank notes this is a regular production increase and does not represent an emergency activation of spare capacity.

Renewed Houthi Attacks: Yemeni Iran-backed Houthi forces announced the resumption of attacks on Red Sea shipping. Deutsche Bank sees limited market impact from this risk, given commercial shipping has already adapted to rerouting around the Cape of Good Hope.

OPEC Has Spare Power, But the Strait Must Reopen

Deutsche Bank argues the core contradiction is: OPEC's spare capacity is ample enough to fill Iran's export gap, but only if the Strait of Hormuz remains open.

Iran exported about 1.6 million barrels/day in January, while OPEC's core spare capacity (Saudi Arabia, Kuwait, UAE) is approximately 2.8 million barrels/day, theoretically sufficient to cover any supply shortfall. The usual operation is to use onshore tank inventories for a smooth transition, but actual production increases take some time.

However, Deutsche Bank also notes that once Iran's export capacity is severely compromised, its strategic logic changes—the cost of blocking the Strait falls, and motivation rises. Iran would still need to weigh the cost of its relations with Gulf countries.

On enforcement capability, Deutsche Bank notes that the US-Israeli coalition has targeted Iran’s naval assets, and US naval strength in the region is significant; Iran’s capacity to forcibly enforce an embargo may sharply decrease, even approach zero. The key issue is that Iran has not yet laid naval mines in the strait—if no mines are laid, the blockade can be lifted quickly under suitable conditions; if Iran deploys large-scale mines, the US Navy may take months to clear them.

Deutsche Bank's Three Scenarios: Ranging from $70 to $200

Deutsche Bank divides the Strait of Hormuz situation into three scenarios based on current information, with the extent of damage to Kharg Island and duration of blockade as the two critical unknowns.

Scenario 1: Strait Reopened. If Iran announces opening the strait within two weeks as part of a ceasefire’s precondition, and its export capability is not materially constrained or Kharg Island damage is rapidly repaired, oil prices will stabilize near $80 per barrel, then fall back to the $70 range.

Scenario 2: Partial/Fuzzy Blockade (currently the closest to reality). Iran maintains the blockade announcement, missile or drone attacks can damage ships, but mines have not been laid. A few vessels can still pass; most shipping remains cautious. In this scenario, despite OPEC’s emergency increase, Brent crude fluctuates between $80-$100 per barrel, and shipping insurance may suspend coverage for Hormuz.

Scenario 3: Full Forced Blockade. Iran deploys large-scale naval mines, anti-ship missiles, warships, naval drones, and helicopters for a full blockade; US Navy tries to clear mines while Iran continually lays more; commercial ships avoid the strait long-term, transit volume drops to zero. In this case, Deutsche Bank expects Brent crude to surge towards $200 per barrel, as all regional crude and refined product exports are totally blocked and OPEC can barely respond.

Situation Trajectory: Tug-of-war Between De-escalation and Re-escalation

Deutsche Bank notes that the trajectory in the coming days will be shaped by multiple forces, with de-escalation factors including: the domestic political pressure on Trump from rising oil prices, divisions in the US Congress over joint US-Israeli strikes on Iran, and the Gulf states’ priority on macro stability and economic diversification agendas.

Factors impeding de-escalation include: how Iran responds to the Supreme Leader's death, follow-up actions from the US, Israel, and GCC, and the policy direction of Iran's new leadership. On leadership, experts see Mojtaba Khamenei (Khamenei’s son) and the Larijani family as major candidates, but “neither has an obvious consensus base.” The possibility of regime collapse is seen as low because the IRGC’s institutional foundation is solid: “although public discontent is real and widespread, fragmentation and suppression limit political conversion.”

For oil market baseline assumptions, Deutsche Bank notes that Brent crude had already priced in a $6-$8 risk premium before this conflict. If only considering Iran and Russia’s export shrinkage (each about 300,000 barrels/day since October-November), fair value should be around $65 per barrel instead of the previous $60 benchmark. Shipping data shows floating inventories have sharply declined since mid-January, with disposal speed averaging 1.26 million barrels/day, offsetting some export contraction.

Kpler analysts believe that “brief slowdowns, rerouting, or intensified maritime security checks” are more likely than prolonged full blockades; Deutsche Bank currently qualitatively categorizes this conflict as closest to Scenario 2.

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