APPLETON, Wis. — As geopolitical tensions simmer in the Middle East, energy analysts are warning that oil prices could surge far beyond the $100 per barrel mark, potentially reaching $140 if Iran follows through on threats to close the Strait of Hormuz. The strait, a narrow waterway off the coast of Iran that serves as a chokepoint for global energy shipments, carries about 20 million barrels of oil per day and more than 100 billion cubic meters of liquefied natural gas annually. According to experts at ING, a major financial services firm, such a closure amid escalating conflicts could trigger immediate and severe disruptions to worldwide supplies.
The warnings come at a time of heightened military activity in the region, with unconfirmed reports circulating of strikes on Iran's Kharg Island, a key oil export terminal that handles roughly 1.5 million barrels per day, much of it bound for China. These reports, which remain unverified by official sources, have added to the uncertainty gripping energy markets. Separately, Israel has preemptively shut down its Leviathan and Karish natural gas fields in the Mediterranean, halting production equivalent to 17 billion cubic meters per year and underscoring the broader ripple effects of the conflict.
ING analysts outlined the potential price trajectory in a recent report, emphasizing the risks of prolonged military engagement. "ICE Brent could trade into the region of $80-90/bbl immediately, with risks for further strength towards $100/bbl and ultimately $140/bbl (worst-case scenario), if we are to see significant and extended oil supply disruptions," the firm stated. Brent crude, a global benchmark for oil pricing, has already shown volatility in recent trading sessions, though it remains below $80 per barrel as of Friday afternoon.
The Strait of Hormuz has long been a flashpoint in regional disputes, connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea. Iran has repeatedly threatened to blockade the strait in response to perceived aggressions, a move that would not only affect oil flows but also liquefied natural gas shipments from Qatar, the world's largest exporter of the fuel. The U.S. has signaled it would respond forcefully to any such attempt, with military assets positioned in the area to ensure freedom of navigation.
Beyond oil, the analysts at ING pointed to even steeper impacts on natural gas markets in Europe and Asia. Disruptions to Qatari LNG flows could drive prices on the Title Transfer Facility (TTF) in Europe to between €80 and €100 per megawatt-hour, equivalent to $28 to $35 per million British thermal units. These projections assume anticipatory market reactions to extended supply losses, which could exacerbate energy shortages already straining European economies since Russia's invasion of Ukraine in 2022.
The current tensions trace back to a series of events over the past week, including reported Israeli airstrikes on Iranian targets and retaliatory actions that have led to the shutdown of major air corridors across the Middle East. Airlines have rerouted flights, causing widespread delays and cancellations for passengers traveling between Europe, Asia, and the Gulf states. Officials from the International Air Transport Association reported that these closures have affected thousands of flights, with economic losses mounting by the hour.
Iranian state media has not confirmed any strikes on Kharg Island, but local reports from the Persian Gulf region describe heightened security around the facility. Kharg, located about 25 kilometers off Iran's coast in the Persian Gulf, is responsible for exporting nearly all of the country's crude oil. A disruption there would not only hit Iranian revenues but also supply chains feeding major importers like China, which relies on the Middle East for a significant portion of its energy needs.
Israel's decision to close the Leviathan and Karish fields, both operated by a consortium including U.S.-based Chevron and Israeli firm Energean, reflects preemptive measures amid fears of escalation. The Leviathan field alone supplies gas to Israel, Jordan, and Egypt, and its shutdown has prompted emergency allocations from domestic reserves. Egyptian officials said the move could lead to power shortages in the coming days if not resolved quickly.
Market participants are closely watching for any signs of de-escalation, but the outlook remains grim. Prediction markets, where bettors wager on future events, show a 58% probability of a new nuclear deal between the United States and Iran before 2027, up 17 percentage points from recent levels. Platforms like Polymarket, which host these contracts, indicate growing optimism for diplomacy, though skeptics argue that current hostilities make such an agreement unlikely in the near term.
The United States Oil Fund (USO), an exchange-traded fund tracking oil prices, saw shares dip slightly on Friday amid the uncertainty, trading at around $12 per share. Investors are hedging against volatility, with options activity spiking on both the New York Mercantile Exchange and the Intercontinental Exchange. Analysts from other firms, including JPMorgan, have echoed ING's concerns, forecasting that a full Hormuz closure could shave up to 5% off global GDP growth in the affected year.
Historical precedents add weight to these warnings. In 2019, after attacks on Saudi oil facilities, Brent crude jumped 15% in a single day. A Hormuz blockade would dwarf that event, potentially halting 20% of the world's seaborne oil trade. The U.S. Energy Information Administration has long identified the strait as the most critical oil transit chokepoint, with alternatives like pipelines through Saudi Arabia or the UAE offering limited capacity to reroute flows.
European leaders, already grappling with high energy costs, are urging restraint. German Chancellor Olaf Scholz called for "immediate diplomatic channels" to be opened during a press conference in Berlin on Thursday, while French President Emmanuel Macron warned of "catastrophic consequences" for global trade. In Asia, Japanese and South Korean officials have begun coordinating with U.S. allies to secure alternative supplies from the Americas and Australia.
The broader economic implications extend to consumers worldwide. Higher oil prices would likely translate to increased costs at the pump, with U.S. gasoline averaging $3.50 per gallon last week and poised for further rises. Inflation, which has cooled somewhat in recent months, could reignite, prompting central banks to reconsider rate cuts. ING's report also notes potential knock-on effects for commodities like metals and agriculture, as shipping costs escalate.
As the situation unfolds, international observers are monitoring Iran's next moves closely. Supreme Leader Ayatollah Ali Khamenei has not issued a direct statement on the strait, but Iranian foreign ministry spokespeople have reiterated warnings against further military actions. The U.S. State Department, in a briefing Friday, affirmed its commitment to protecting energy routes, with Secretary of State Antony Blinken scheduled to meet with Gulf allies next week.
While the worst-case scenarios paint a dire picture, some experts caution against panic. "Markets have priced in a premium for risk, but actual disruptions would need to be sustained to reach those highs," said a strategist at Rystad Energy, who requested anonymity due to client sensitivities. For now, the world watches the Strait of Hormuz, a 21-mile-wide artery whose flow could dictate the pace of global recovery or recession in the months ahead.