Global Oil Reserves May Mitigate Initial Impact of Hormuz Disruption, but Long-Term Disruption Could Fuel $150 Price Surge

Global Crude Prices at Risk of Surge due to Strait of Hormuz Disruption

Key Figures:

• 20 million barrels per day (mbpd): Normal crude and petroleum products exported through the Strait of Hormuz
• 15 mbpd: Potential crude exports affected in the event of a prolonged disruption
• $110-$150 per barrel: Estimated global crude prices if the disruption lasts up to eight weeks

A report by Nuvama Institutional Equities estimates that a prolonged disruption to crude flows through the Strait of Hormuz could lead to a significant supply shock. Located between Iran and Oman, the Strait is the world's most critical energy chokepoint, carrying about 20 mbpd of crude and petroleum products.

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Strategic Reserves and Alternatives May Offset Challenges

Emergency measures could partially offset the impact of a disruption. Saudi Arabia's East-West pipeline could redirect about 4 mbpd of crude, while China could release around 3 mbpd from its strategic petroleum reserves. Japan and South Korea together could provide about 4.5 mbpd from their stockpiles. The United States could release about 1-1.5 mbpd from its Strategic Petroleum Reserve.

Challenges Remain

Even with these measures, markets could remain tight. Energy consultants estimate that a four-week disruption could push crude prices to about $110 per barrel, while an eight-week outage could drive prices close to $150. Asian economies are expected to be the most exposed, with about 13 mbpd of crude shipments through Hormuz destined for Asia.

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Refining Markets at Risk

Analysts estimate that global refinery runs could fall by around 2.5-3 mbpd if crude deliveries are delayed, reducing fuel output and tightening supplies of gasoline and diesel. Refining margins in Asia have already risen $5-$7 per barrel above late-February levels, reflecting concerns over supply shortages. India may face temporary cooking gas shortages if the crisis persists, as global strategic reserves for liquefied petroleum gas (LPG) are limited.