Hormuz Closure Could Cut Oil Supply by 13 Million Barrels Per Day

Barclays analysts have warned of a massive oil supply disruption if the Strait of Hormuz remains closed for an extended period. The bank estimates that a prolonged closure would lead to a loss of 13-14 million barrels per day, which is roughly a fifth of the world's oil and liquefied natural gas supplies.

This estimate is based on the assumption that exports from Yanbu and Fujairah have picked up in recent weeks and are not threatened by the closure. The International Energy Agency estimates that global oil demand this year will be around 104-105 million barrels per day, so a disruption of this magnitude would have significant implications for the market.

The bank also notes that supply elasticity is structurally weaker than it was in past shocks, with OPEC+ spare capacity under-delivering and non-OPEC+ growth decelerating due to years of under-investment. This means that the market may struggle to respond to a disruption of this scale, leading to higher prices.

The bank's base case is that traffic through the Strait will normalize by early April, which would result in Brent averaging $85 per barrel in 2026. However, if disruptions persist until end-April, Brent forwards could reprice to $100 per barrel, and in a more prolonged scenario stretching to end-May prices could rise to $110.