WTI seen at $80-85 near term; Hormuz risk may keep prices volatile: Analyst

Oil prices rose sharply after Iran's Supreme Leader, Ayatollah Mojtaba Khamenei, said that Tehran could leverage the potential closure of the Strait of Hormuz and warned of attacks on Gulf Arab states

Asian economies most affected by energy crisis

Brent crude settled above $100 per barrel for the first time on March 12 after a week of heightened volatility. Prices moved sharply higher following remarks by Iran’s Supreme Leader, Ayatollah Mojtaba Khamenei, who signalled that Tehran could leverage the potential closure of the Strait of Hormuz and warned of continued attacks on Gulf Arab states. He further indicated that Iran could open additional fronts if U.S. and Israeli operations persist.

 

Entering the second week of the conflict, roughly 90 per cent of traffic through the Strait has been disrupted, affecting an estimated 7.5 per cent of global seaborne trade. The resulting paralysis of this critical corridor—through which 20–21 million barrels per day of crude, or around 20 per cent of global supply, normally flows—has triggered immediate supply shocks across the Gulf Cooperation Council.

 

 

Iran's own production of 3.2 mb/d effectively ceased as NIOC declared force majeure on all export contracts. Qatar's Ras Laffan complex, which supplies 77 million tonnes per annum of LNG, followed with a force majeure declaration on March 4. Saudi Aramco, though operationally unaffected, pre-emptively reduced tanker dispatches from Ras Tanura by 10 per cent, given uninsurable war-risk premiums and vessel operator refusals. UAE's ADNOC similarly curtailed Jebel Ali loadings. Kuwait and Iraq face export chokepoints through the Gulf waters that they cannot reroute in the short term.

 

The gravity of the situation pushed IEA members to release oil from the strategic petroleum reserve to suppress the oil prices. The US Strategic Petroleum Reserve held approximately 350 million barrels as of early March 2026 (US DOE, March 6, 2026), partially rebuilt after the 2022-23 Biden-era releases, but still 33 per cent below the 2020 level of 638 mb. The IEA's collective reserve system holds approximately 1.2 billion barrels across member states.

 

A coordinated IEA release at the maximum practical rate of 12 million barrels per day would theoretically cover the 5.6 mb/d supply gap for approximately 100 days. In practice, physical release constraints pipeline infrastructure, refinery intake capacity, and quality mismatches between SPR sour crude and refinery configurations cap effective daily release rates at 3-4 mb/d for the US and 5-6 mb/d for the IEA collectively. While we are seeing output cuts at 8 mbpd from OPEC members.

Inflationary fear concerns

Energy prices are the most direct and fastest-transmitting inflationary force in modern economies. The inflation transmission mechanism operates through three channels: direct (retail fuel, heating oil, jet fuel pass-through to CPI), indirect (transport costs embedded in every manufactured good), and second-round (wage demands responding to higher living costs). Crude oil could sustain around or above $100/b in the absence of any meaningful strait closure, and for every $10 increase above $80 is expected to see a 0.3-04 percent point addition to CPI for advanced economies, and 0.5-0.7 percentage point for energy-import-dependent emerging markets.

 

The 1973 Arab Oil Embargo triggered a 3 per cent contraction in advanced economy GDP. The 1979 Iranian Revolution precipitated a -2.3 per cent global recession. Under our moderate scenario (60–90-day closure, Brent $100-110/bbl), global growth contracts by 1.1-1.3 percentage points from the IMF's 3.1 per cent January baseline — landing at approximately 1.8-2.0 per cent for full-year 2026.

Crude oil burns Asian economies

Asia represents the most significant direct casualty of Hormuz disruption. Japan imports over 90 per cent of its crude from the Middle East, and while it maintains 90+ days of Strategic Petroleum Reserve, South Korea, however, has a marginal buffer. China is the critical variable. China imports approximately 11 mb/d of crude, of which 44 per cent transits the Strait of Hormuz. India's current account deficit widens by approximately $60-70 billion annualised for every $20/bbl crude price increase (RBI modelling, 2024), triggering rupee pressure, imported inflation, and tighter monetary conditions — precisely the wrong environment for an economy growing at 6.5 per cent.

Outlook

Oil prices are likely to remain volatile amid ongoing geopolitical developments; however, the effective floor for crude benchmarks has shifted higher than pre-war expectations. We expect WTI to trade in the $80–85 range over the next three months and to average around $75 by the end of 2026. In the event of a Strait of Hormuz closure, WTI could trade within a broader $90–105 range in March.  Disclaimer: This article is by Mohammed Imran, research analyst. Mirae Asset Sharekhan. Views expressed are his own.