Oil to get costlier the more Hormuz disruption drags on amid war risks

Dubai: Oil prices are likely to remain elevated, and could rise further in the near term, as ongoing disruption in the Strait of Hormuz and uncertainty surrounding the conflict involving Iran continue to tighten global supply conditions.

Brent crude rose 1.7% to $100.16 per barrel on Wednesday, reflecting persistent concerns over whether oil flows from the Arabian Gulf can return to normal levels. Prices have climbed sharply from around $70 before the conflict, underlining how quickly supply risks have been priced into the market.

Supply disruption risk

The Strait of Hormuz remains the central pressure point. The narrow shipping lane, which typically carries about 20% of global oil exports, has seen sharply reduced traffic following recent attacks on vessels and seizures of tankers.

This disruption has effectively constrained one of the world’s most critical energy routes, limiting the movement of crude to global markets.

At the same time, Donald Trump has extended a ceasefire to allow negotiations to continue, but the United States has maintained a blockade on Iranian ports. The dual dynamic—partial de-escalation alongside continued restrictions—has prolonged uncertainty over how quickly supply conditions can normalise.

The standoff has also raised doubts about the timing and effectiveness of any potential agreement, leaving markets cautious.

Conflicting signals

Analysts say oil markets are being shaped by a mix of opposing forces, which is keeping prices elevated but relatively contained.

“Oil markets are volatile because of mixed, often conflicting headlines and deep mistrust between Iran and the U.S.,” said Ole Hansen.

He added that “the Strait of Hormuz is effectively closed, causing large disruptions to oil flows,” while weaker demand—particularly in Asia—and inventory drawdowns in China have helped offset some of the supply loss.

This combination has prevented crude prices from rising significantly above the $100 level for now, even as underlying conditions tighten.

However, pressure is building in refined fuel markets. Hansen noted that diesel, jet fuel and petrochemical feedstocks are already in short supply, with rising costs forcing airlines and governments to consider operational adjustments.

Structural constraints

Even in a scenario where the Strait of Hormuz reopens, analysts expect recovery in supply chains to be slow.

“Even if the waterway reopens, recovery will be slow: tankers are out of position, refineries and upstream facilities may be damaged, and restarting production and logistics will take weeks or months,” Hansen said.

He warned that lost production could reach hundreds of millions of barrels, tightening the market structurally and raising the floor for oil prices once temporary demand weakness fades.

Political uncertainty within Iran adds another layer of risk, with internal dynamics potentially delaying or weakening any agreement, increasing the likelihood of further price volatility.

Delay pushes prices higher

The full impact of current disruptions may not yet be reflected in prices.

Qatar finance minister has warned that current price premiums could be only “the tip of the iceberg,” with more significant effects expected to emerge within the next two months if the Strait remains constrained.

For now, oil markets are being driven primarily by supply-side risks rather than demand strength.

• Restricted flows through the Strait of Hormuz are limiting global supply

• Geopolitical uncertainty is delaying a clear resolution

• Refining capacity and fuel availability are tightening

This suggests prices are likely to remain supported near current levels, with any sustained decline dependent on a clear and stable reopening of key shipping routes.

Until then, the market is likely to remain sensitive to geopolitical developments, with limited room for a meaningful drop in oil prices.