UBS Warns Crude Oil Disruptions Will Haunt Markets for Years

UBS strategist Bhanu Baweja has sounded an alarm about the severity of global crude oil supply disruptions. Brent crude prices have consistently traded above $100 per barrel, and geopolitical tensions are limiting transit. This is a concern for India, which faces risks including higher inflation, potential rupee depreciation, and pressure on corporate profit margins.

The main issue lies in the structural reduction of crude moving through essential transit routes. The Strait of Hormuz has seen a sharp decline in shipping traffic, with daily transits now frequently dipping below historical averages. Incidents like the temporary shutdown of Saudi Arabia's East-West pipeline have removed an estimated 4 to 5 million barrels per day from the market.

This supply void, combined with geopolitical instability in the Middle East, has led some observers to suggest that normalized energy flows may not return to pre-disruption levels until 2027. Global demand has also increased, with China returning to the global market and companies replenishing their stocks. This is putting pressure on prices, leaving little cushion for further disruptions.