The US-Iran war triggers the largest "oil supply disruption" in history; analysts warn that oil prices could have "no ceiling."

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International oil prices have undergone a dramatic reversal. The US-Iran conflict has led to the closure of the Strait of Hormuz, triggering the largest oil supply disruption in history, with around 20% of global oil shipments affected. On Monday, international oil prices fluctuated sharply, with WTI crude moving as much as $38 within the day, surging to near $120 per barrel at one point.

Subsequently, as major economies discussed releasing strategic oil reserves and Trump signaled a ceasefire, oil prices quickly retreated to near $90 per barrel.

According to a CNBC report on Monday, former International Energy Agency head of oil Neil Atkinson said, the actual closure of the Strait of Hormuz is an unprecedented situation for the energy market. He warned:

"Unless the situation reverses quickly, we will face an unprecedented, game-changing energy crisis."

Regarding oil prices, he bluntly stated:

"There is no precedent to follow now, trajectories can only be reasonably guessed, and the sky is the limit."

Currently, oil prices remain volatile, and the US-Iran situation is still the key variable hanging over the oil market.

Largest Supply Shock in History: The Scale Exceeds All Previous Historical Cases

According to analysis from energy consulting firm Rapidan Energy, the scale of this supply disruption exceeds any previous oil crisis, more than double the prior record.

Rapidan analysts noted that the previous largest supply shock occurred during the Suez Canal crisis in 1956, when Britain, France, and Israel invaded Egypt’s Sinai Peninsula, affecting about 10% of global oil supply. The impact from the Strait of Hormuz lockdown is nearly triple that of the 1973 Arab oil embargo (which affected about 7% of global supply).

The Strait of Hormuz typically carries about 20% of global oil and gas shipments, but since the outbreak of war, vessel traffic has almost completely stalled for nine days.

No Spare Capacity Available: Market Lacks Effective Buffer

Rapidan analysts emphasized that the fundamental difference between this supply shock and historical crises is that there is almost no idle global production capacity available for deployment. Saudi Arabia and the UAE hold most of the flexible capacity, but due to the Strait of Hormuz closure, both countries are cut off from the global oil market. He said:

"This conflict has taken offline the largest share of global supply in history, while also disrupting the main flexible capacity holding countries, resulting in the market having no substantial buffer, and no swing producers able to step in and fill the gap."

Analysts pointed out that, against this backdrop, the global oil market will have to rely on sharply higher prices to curb demand in order to achieve supply-demand rebalance. The US Strategic Petroleum Reserve currently holds about 415 million barrels, about 58% of the statutory maximum of 714 million barrels. Rapidan believes this reserve is "limited and insufficient to fully offset" the supply gap trapped in the Persian Gulf due to the Hormuz closure.

Production Shutdowns Spread: Multiple Countries Have Begun Cutting Output

As the situation persists, Middle Eastern oil producers have begun reducing output one after another. CNBC reports that Iraq, Kuwait and others have started shutting down part of their capacity. Analysts at Societe Generale warned in a Monday research report that long-term shutdowns in Middle Eastern countries will 'significantly increase' the risk of restarting difficulties. He stated:

"The UAE may be the next producer at risk of shutdown, with the time window possibly in the next five to seven days. Qatar is also at risk; although its oil production is relatively limited, its LNG exposure is large."

Janiv Shah, Vice President of Oil Markets at Rystad Energy, predicts that if the current situation lasts for four months, Brent crude futures could rise to $135 per barrel. He stated in a report on Monday:

"Based on current conditions, our forward analysis for the next two months shows oil prices will remain above $110 per barrel."

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