Wall Street analysts are scrambling to assess the financial fallout from the latest Middle East conflict, with energy prices taking center stage. Brent crude has already jumped 8% to $78.50 a barrel, and major banks are warning of much higher prices if the crisis deepens. The Strait of Hormuz, through which a fifth of global oil supply flows, is now virtually closed to traffic.

JPMorgan analysts admit their base case failed, warning that if the Strait remains shut, Gulf states have only 25 days of production capacity left. They estimate oil could reach $120 a barrel in a worst-case scenario. Barclays projects Brent hitting $100, while Goldman Sachs maintains its base case but adds an $18 per barrel risk premium for potential supply disruptions.

China faces particular vulnerability, importing over 11 million barrels daily from the region. While Beijing maintains it has 1.21 billion barrels in strategic reserves, its imports from Iran—officially listed as zero—raise questions about supply chain transparency. The real concern is that oil stranded in the wrong place becomes worthless, forcing the remaining global supply to be auctioned among buyers. With constrained supply, prices will rise until they shut down economic activity for the marginal buyer.