ING’s Warren Patterson highlights that Oil markets are repricing for a longer disruption of flows through the Strait of Hormuz, with around 8m b/d of crude already shut in. The report argues that limited spare capacity, slow US supply response and constrained alternatives mean higher Oil prices under ING’s new base case scenarios for 2026.

Oil supply shock under revised scenarios

"Energy markets are having to continuously price in a more prolonged disruption to oil and gas flows through the Strait of Hormuz, with little sign of de-escalation or a resumption in oil and LNG flows through the key chokepoint."

"A more prolonged disruption means that we are only likely to continue to see producers reduce upstream production as they try to manage storage constraints. Further upstream shut-ins will only prolong a return to normal, even if the Strait of Hormuz reopens, as it will take time to ramp up production. Up until now, around 8m b/d of crude oil production has been shut-in, according to the International Energy Agency."

"While we are also likely to see a supply response, particularly from the US, it will be too little too late. Additional supply from the US would likely take at least six months to come online, and the volumes will be a fraction of the losses we are currently seeing."

"OPEC’s spare capacity is of little use when oil is not flowing through the Strait, given that almost all spare capacity sits in the Persian Gulf."

"Under this scenario, energy flows remain at almost a full standstill until the end of May, before gradually recovering between June and August. Oil prices spike to record highs under this scenario, and prices will need to remain elevated to balance the market through demand destruction, given the limited solutions on the supply side."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)