The Price Shock No One Could Ignore
As of March 20, 2026, Brent crude was trading at $107.40 per barrel — roughly $35 higher than the same point a year ago. Fortune The pace of the move has been staggering. The Brent spot price surged from an average of $71 per barrel on U.S. Energy Information Administration February 27 to $94 by March 9, following the onset of military action in the Middle East that began on February 28. What started as a geopolitical risk premium has since turned into a genuine, physical supply crisis — one with no clear resolution in sight.
For context, WTI — the North American benchmark — has tracked in lockstep. Crude prices surged on Friday as the Iran war dragged on, with the Strait of Hormuz closed and Iran continuing attacks on the energy infrastructure of its Middle Eastern neighbours. Gains accelerated after CBS reported that Pentagon officials made detailed preparations for deploying US ground troops into Iran. Barchart
The Strait of Hormuz: The World's Most Important Chokepoint Goes Dark
What the Strait Means for Global Oil
The Strait of Hormuz, a narrow channel between Iran and Oman, is the single most critical artery in global energy infrastructure. Approximately 20% of global oil demand typically transits the Strait — roughly 20 million barrels per day before the crisis. Capital.com There is no simple alternative. Pipelines that bypass the waterway exist but are nowhere near sufficient to absorb the volume previously moving through the channel.
The closure is not theoretical. Crude and oil product flows through the Strait of Hormuz have plunged from around 20 mb/d before the war to a trickle currently, with limited capacity available to bypass the crucial waterway. Gulf countries have cut total oil production by at least 10 mb/d as a result. IEA
Cascading Effects Beyond Crude
The damage extends well beyond crude prices. Widespread flight cancellations in the Middle East and large-scale disruptions to LPG supplies are expected to curb global oil demand by around 1 mb/d during March and April. Plunging LPG and naphtha supplies are forcing petrochemical plants to curb production of polymers, while LPG use in cooking and heating — especially in India and East Africa — is also at risk. IEA
QatarEnergy, the state-owned operator of Ras Laffan, said missile attacks reduced the country's LNG export capacity by 17% and that it could take up to five years to repair, with consequences for supply to markets in Europe and Asia. CNN
OPEC+'s Impossible Position
The March 1 Decision
In an extraordinary piece of timing, OPEC+ met on March 1 — just three days after the strikes began — and pressed ahead with a planned output increase. Eight OPEC+ countries including Saudi Arabia and Russia agreed to raise oil output by 206,000 barrels per day in April 2026, gradually reversing voluntary cuts introduced in 2023. Saudi Arabia is set to add 62 kb/d, Russia 62 kb/d, Iraq 26 kb/d, and the UAE 18 kb/d. Enerdata
The irony is hard to overstate. Analysts noted the group currently has little spare capacity to add to supply, except for Saudi Arabia and the UAE — who will also struggle to export oil until navigation in the Gulf returns to normal. CNBC
The Structural Backdrop
Before the war upended everything, OPEC+ had spent 2025 carefully releasing barrels back into the market. The group raised production quotas by about 2.9 million barrels per day from April through December 2025 — roughly 3% of global demand — before pausing increases for the first quarter of 2026 due to seasonal weakness. CNBC The cartel still holds roughly 3.24 million barrels per day of cuts in reserve, giving it theoretical room to manoeuvre if the conflict resolves.
Supply, Demand, and the Inventory Picture
Global Demand: A Revised Outlook
Global oil consumption is now set to increase by just 640,000 barrels per day year-on-year in 2026 — down 210,000 b/d from last month's estimate — as higher prices and a deteriorating economic outlook erode demand across the product spectrum. IEA
J.P. Morgan Global Research notes that world oil demand is projected to expand by 0.9 million barrels per day in 2026, while global oil supply was, before the conflict, set to outpace demand — pointing to sizable surpluses later in the year. J.P. Morgan That calculus has been upended entirely by the Hormuz disruption.
The Inventory Buffer
The one piece of good news for markets is the level of global stocks. Global observed oil inventories of crude and products are currently assessed at more than 8.2 billion barrels — the highest level since February 2021 — providing consumer countries with significant amounts of oil in storage to bridge temporary supply losses. IEA
The IEA Emergency Response
IEA member countries unanimously agreed on March 11 to make 400 million barrels of oil from their emergency reserves available to the market to address disruptions stemming from the war in the Middle East. IEA The United States, as part of this coordinated release, committed to releasing more than 172 million barrels of crude from its Strategic Petroleum Reserve. CNN
US Production: The Counter-Cyclical Wildcard
Higher prices have an automatic stabiliser built in: they incentivise more drilling. The EIA expects US crude oil production to average 13.6 million barrels per day in 2026, rising to 13.8 million b/d in 2027 — with the 2027 forecast now 0.5 million b/d higher than last month's projection. U.S. Energy Information Administration
The Trump administration has moved in parallel to accelerate domestic output. In 2025, it reopened more than 1.5 million acres in the Coastal Plain of the Arctic National Wildlife Refuge for oil and gas leasing, reversing prior policy. The White House has also floated the option of lifting sanctions on Iranian oil already at sea CNN to ease prices — an unusual proposition given that Iran is the adversary in the current conflict.
What the Banks Are Saying
Goldman Sachs: Months at Triple Digits
Goldman Sachs' more favourable case assumes a gradual recovery in oil flows through the Strait from April, which would ease Brent prices to the $70s by the fourth quarter of 2026. CNN The less favourable scenario — an extended closure — implies prices staying well above $100 for considerably longer.
J.P. Morgan: Still Bearish on the Full Year
J.P. Morgan Global Research maintains that Brent will average around $60 per barrel in 2026, anchoring its view to soft supply-demand fundamentals and the prospect of sizable surpluses building through 2026–27 without aggressive OPEC+ action. J.P. Morgan That base case was built before the Hormuz closure — and is now under severe pressure.
EIA: Above $95 in the Near Term, Then Lower
The EIA forecasts Brent will remain above $95 per barrel over the next two months before falling below $80 in the third quarter of 2026 and around $70 by year-end. Prices are expected to average $64 per barrel in 2027. U.S. Energy Information Administration The agency is explicit that this forecast is highly dependent on assumptions about conflict duration and resulting production outages.
Implications for India
India sits in a particularly complicated position. As one of the world's largest crude importers — with a heavy reliance on Gulf supply routes — the Hormuz closure creates direct cost pressure on its import bill, inflation trajectory, and currency. The disruption to LPG flows poses an additional challenge for household energy consumption, particularly in lower-income segments.
India has also recently scaled back its intake of Russian crude under sanction pressure, losing an estimated 600–800 kb/d of discounted supply, with those flows being redirected toward China. J.P. Morgan That rebalancing, combined with the Gulf crisis, leaves Indian refiners navigating a significantly tighter and more expensive sourcing environment than they faced entering the year.
The Bigger Picture: A Market Permanently Changed?
The events of the past three weeks have exposed the oil market's central vulnerability: its extraordinary concentration of physical flows through a single, 33-kilometre-wide waterway. Diversification of supply routes, strategic reserve capacity, and energy transition investments all look more urgent in this context — but none will resolve the immediate crisis.
Goldman Sachs estimated an $18-per-barrel real-time geopolitical risk premium embedded in prices as of early March. Capital.com That premium has since expanded materially. How long it persists depends almost entirely on how quickly — or slowly — the Strait of Hormuz reopens to normal traffic.
For now, oil markets are in a state of sustained emergency. The physical disruption is real, the policy responses are partial, and the path back to normalcy is anything but clear.