The closure of the Strait of Hormuz, which normally handles 20% of global oil and LNG shipments, has forced markets to reassess energy price trajectories. Analysts warn that even a partial shutdown could reduce global supply by 2mn barrels daily—equivalent to 2% of consumption. Goldman Sachs estimates the world holds about 8bn barrels in strategic reserves, though these cannot fully offset potential disruptions.

Extended closure appears unlikely, given potential diplomatic resolutions or US Navy intervention. Still, the world was already expecting oversupply this year, with additional capacity from US shale and Guyana potentially offsetting some losses. A 12mn barrel daily shortfall would exceed the demand drop seen during the pandemic, though such extremes remain improbable.

Historical comparisons offer instructive parallels. Between 2007-2009, a 2% demand decline coincided with a peak oil price of $147, equivalent to $222 today. The current situation differs: global economic fundamentals vary, and oil demand has proven inelastic. Even with these caveats, the market's most bearish projections appear conservative against historical precedents, suggesting $200 oil warrants serious consideration.