If oil and gas infrastructure is targeted, oil prices could surge to $120! The key moving forward is the Strait of Hormuz.

The blockage of shipping through the Strait of Hormuz is re-pricing the oil market as a “geopolitical shock priority.” Multiple investment banks agree that the key risk isn’t whether OPEC+ has spare capacity, but whether these additional volumes can pass through the strait. If transit restrictions persist, the upside potential for oil prices will quickly open.

Brent crude opened on Monday with a jump of 13%, breaking above $82 per barrel. As of press time, it was trading at $78 per barrel. The market is preparing for longer-term volatility and supply chain disruptions. Over the weekend, as U.S. and Israeli strikes on Iran escalated into regional conflict, oil tanker traffic within the strait nearly came to a halt.

Iran claims the waterway remains open but also states responsibility for the attack on three oil tankers on Sunday. After the U.S. designated a maritime warning zone, shipowners generally paused crossing this “throat,” and about one-fifth of the world’s daily crude and LNG shipments typically pass through the Strait of Hormuz. Any delays could quickly translate into risk premiums.

Against this backdrop, Citigroup has raised its short-term Brent forecast to $85 and warns that if regional oil and gas infrastructure is targeted, oil prices could surge to $120. HSBC emphasizes that the strait is the “main variable” in oil market risk; if closed, idle capacity in the Middle East Gulf will be unable to stabilize the market due to transportation disruptions.

Citigroup: Short-term anchor at $80-$90, infrastructure strikes could push to $120

Citigroup has increased its short-term Brent forecast by $15 to $85. The bank expects that, with ongoing risks to energy infrastructure and “disrupted” flows through the Strait of Hormuz, Brent will likely trade within the $80-$90 range this week.

The “base case” scenario is a de-escalation within 1-2 weeks, triggered by factors such as leadership changes in Iran or U.S. decisions to downgrade after observing leadership shifts and weakening Iran’s missile and nuclear programs. In a more aggressive scenario, if regional oil and gas infrastructure is attacked, prices could rise to $120 per barrel, with a 20% probability assigned to this scenario.

Latest reports indicate that the Ras Tanura refinery in Saudi Arabia was hit by a drone and shut down. According to Xinhua, Al Jazeera on the 2nd cited Iranian military sources reporting attacks on three UK and US oil tankers in the Persian Gulf and the Strait of Hormuz.

Saudi Aramco states that Ras Tanura is the largest refinery in the Middle East, with a refining capacity of 550,000 barrels per day.

HSBC: “Asymmetric” Risks—Strait Closure Means Idle Capacity Cannot Enter Market

In a research report dated February 27, HSBC assessed that risks related to Iran are “asymmetric” for oil prices, with most escalation scenarios pointing upward, and the main concern being “passage through the Strait of Hormuz.”

HSBC notes that idle capacity in the Gulf is “significant,” totaling about 4.6 million barrels per day across OPEC members—Saudi Arabia, UAE, Iraq, Kuwait, and Iran. However, if the strait is closed, much of this capacity cannot reach the market.

Approximately 19-20 million barrels of liquids per day pass through the strait. Insufficient alternative routes mean the impact of a closure cannot be fully offset. HSBC lists rerouting options such as Saudi Arabia’s 5-7 million barrels per day East-West pipeline and the UAE’s Adnoc pipeline to Fujeirah, but overall, these are still inadequate to handle the volume carried by the strait.

HSBC estimates that about 19% of global supply (crude and refined products) depends on passing through the Strait of Hormuz. Even a “short-term” disruption could push prices higher. In scenarios of “military escalation and Iranian retaliation,” Brent could spike to $80.

Secondary impacts on shipping and refined products: not just crude, risk premiums will spread along the supply chain

HSBC warns that the risks in the Strait of Hormuz are not limited to crude oil but will also propagate to refined products. About 10% of global diesel and 20% of jet fuel supplies depend on crossing the strait. Tensions have already driven up intermediate distillate prices, and prolonged disruptions could cause seasonal shortages in some products.

Data on transit volumes explain why markets are highly sensitive to shipping delays in the strait.

CITIC Construction Investment Research’s Chief Energy and Chemical Analyst Gao Mingyu states that in 2025, the total crude oil and refined product exports from Persian Gulf countries via the Strait of Hormuz will be 18.672 million barrels per day, accounting for 27.1% of global exports, with crude and condensate making up 15.007 million barrels per day, 34.5% of the global total.

JPMorgan warns: If the strait is blocked, storage limitations could lead to a complete shutdown of Middle Eastern oil production

According to Wall Street Insights, JPMorgan has conducted detailed estimates of storage capacity in seven Gulf oil-producing countries—Saudi Arabia, UAE, Iraq, Kuwait, Qatar, Oman, and Iran.

The bank estimates that onshore crude storage capacity in these countries is about 343 million barrels, enough to hold roughly 22 days of production. Additionally, around 60 idle oil tankers in the Gulf region could provide extra offshore storage, totaling about 50 million barrels, extending operational capacity by another 3-4 days.

Combined, in a scenario of complete blockade of the strait, Middle Eastern producers could sustain normal operations for at most about 25 days. Beyond that, storage facilities would be saturated, forcing producers to cut or halt output.

This suggests that if the situation worsens, the global energy market will face not just price shocks but physical disruptions of supply.

Supply-demand “overcapacity” remains, but short-term trading frameworks have been rewritten

Although oversupply is still projected for 2026, in the short-term trading context, the price center and volatility range have shifted upward.

Goldman Sachs analyst Daan Struyven notes that the current risk premium of about $18 per barrel effectively prices in six weeks of complete strait closure.

His estimates show that a one-month full closure could push crude prices up by $15; using the full 4 million barrels per day of spare pipeline capacity could narrow the increase to $12; and combining this with a global SPR release of 2 million barrels per day could reduce the rise to $10.

Jorge Leon, Head of Geopolitical Analysis at Rystad Energy, states that if the Hormuz disruption lasts for weeks or months, a $100 per barrel scenario is entirely possible. The actual effect of OPEC+ production increases may be limited, as these additional volumes also need to transit through the strait.

Alan Gelder, Senior Vice President of Refining, Chemicals, and Oil Markets at Wood Mackenzie, also points out that even if OPEC+ announces a production increase in April, as long as the waterway remains closed, additional capacity and existing spare capacity cannot reach the market.

CITIC Construction Investment’s Gao Mingyu estimates that Brent crude prices could rise over periods of about 2 weeks, 1 month, and 2-4 months, with target levels approximately at $77, $80-85, and $90-100 per barrel.

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