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Crude oil prices could surge to as high as USD 95 to USD 110 per barrel if Iran's oil supply and the Strait of Hormuz face disruption amid ongoing tensions, according to a report by Equirus Securities.
The report noted that if Iran's nearly 3.3 million barrels per day (mbpd), which accounts for about 3 per cent of global supply, is disrupted, and assuming a 3-5 per cent price response for every 1 per cent supply shock, it could imply a 9-15 per cent rise in prices. On a base price of USD 70 per barrel, this translates into an increase of roughly USD 6-11 per barrel, lifting crude prices toward USD 76-81 per barrel purely due to direct supply loss. However, the report highlighted that markets do not price wars in a linear manner. It stated that if the escalation threatens the Strait of Hormuz, the premium becomes structural rather than proportional. Even the risk of partial disruption could embed a USD 20-40 per barrel geopolitical premium, reopening a pathway toward USD 95-110 and beyond. It stated "partial disruption risk could embed a USD 20 - USD 40/bbl geopolitical premium, reopening a pathway toward USD 95- USD 110+, well beyond mechanical impact of Iran's barrels alone". The report further observed that markets have so far responded in what it described as a textbook fashion amid expectations of possible escalation. Crude prices have firmed by around 10 per cent since the United States began positioning military assets in the Middle East, as traders priced in a headline-driven geopolitical risk premium. The move reflects the asymmetric risk linked to the Strait of Hormuz, where even a temporary disruption could materially impact global oil flows. The report said oil typically overreacts initially, embedding a geopolitical risk premium, and then gradually adjusts as trade flows are rerouted and fundamentals reassert themselves. It added that the real forecasting challenge is not predicting the initial spike but estimating how long the disruption and the embedded premium will persist. The US and Iran are currently locked in a high-stakes standoff over Iran's nuclear program and its potential to build atomic weapons. While recent talks in Geneva showed some progress, the US is maintaining heavy economic sanctions and a massive military presence in the region Meanwhile, nuclear negotiations between the United States and Iran concluded a third round in Geneva on February 26, without a final agreement, though both sides reported "significant progress." (ANI)
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