Since the outbreak of the Iran war, international oil prices have surged from $60 per barrel in early 2026 to over $100. However, Wall Street institutions warn that this may be far from the peak. The ultimate trajectory of oil prices hinges on one critical variable: the duration of the blockade in the Strait of Hormuz.
Bernstein's energy team has constructed three scenario models based on the blockade's duration. If the blockade lasts one month, Brent crude could peak around $100 per barrel; a three-month blockade could push the peak to $140; and a six-month blockade might see prices reach $170 per barrel. Bernstein considers a one-month blockade the baseline scenario but explicitly states that a blockade lasting three to six months would make a global economic recession "inevitable."
Simultaneously, J.P. Morgan issued a warning from another perspective. According to a previous report, a team led by Natasha Kaneva, J.P. Morgan's head of commodities research, noted in a March 17 report that the stability of Brent and WTI around $100 is an "illusion." Spot prices for Middle Eastern Dubai and Oman crude have already soared to $155 per barrel, creating a price gap of over $55 compared to Brent. The factors supporting Brent's relative stability—regional inventory buffers, benchmark pricing structure biases, and policy interventions—are essentially short-term. Once Atlantic basin inventories are depleted, Brent will be forced to catch up with higher prices.
The market currently largely favors a "short-lived conflict" scenario. Bernstein points out that oil equity pricing implies a 2026 oil price of approximately $80 to $100, with a long-term price around $70, indicating the market has not yet priced in recession risk. "Time will tell if this is correct," Bernstein wrote.
A full closure of the Strait of Hormuz would have a massive potential impact on global supply. According to tanker tracking data, OPEC crude and condensate loadings have already fallen by 13.8 million barrels per day. Combined with an interruption of approximately 1.5 million barrels per day in Middle Eastern LPG production, a full blockade could create a daily supply shortfall of up to 15.3 million barrels. In March, with only partial loading disruptions, the actual impact was about 10 million barrels per day.
Faced with a supply disruption of this magnitude, existing buffer mechanisms are insufficient to fully compensate. Bernstein estimates that of the approximately 250 million barrels of floating storage outside the Persian Gulf, about 150 million barrels could be deployed quickly. Strategic Petroleum Reserves (SPR) could release about 400 million barrels over 180 days, creating a total buffer of around 550 million barrels. However, the firm judges this scale insufficient to offset the cumulative supply gap caused by a prolonged blockade.
Furthermore, while increasing liftings via the UAE's East-West Pipeline to the Red Sea or diverting shipments through the Port of Fujairah are somewhat feasible, Bernstein also notes these alternative routes face the risk of attack by Iran, making the effectiveness of such mitigation highly uncertain.
Bernstein established three distinct price path scenarios based on blockade duration.
* **Baseline Scenario (One-month blockade):** If the strait reopens by the end of March, Brent's monthly peak would be around $100 per barrel, with an average 2026 price of approximately $80 per barrel. Annual demand would contract by about 300,000 barrels per day. * **Moderate Scenario (Three-month blockade):** Brent's monthly peak would climb to $140 per barrel, with an average annual price around $100. 2026 demand would contract by about 1 million barrels per day. Bernstein explicitly stated a global recession would be "inevitable" under this scenario. * **Extreme Scenario (Six-month blockade):** Brent's monthly peak would reach $170 per barrel, with an average annual price around $120. 2026 demand would contract by about 2.3 million barrels per day—a level nearing the 2.4 million barrels per day demand destruction seen during the 2008 global financial crisis.
Despite this, Bernstein believes that, given the severe consequences of a prolonged blockade on the global economy, "rationality will prevail, and a solution is expected to emerge within days to weeks." However, the firm concedes that current market pricing does not yet fully incorporate the tail risks of a three-to-six-month blockade and the accompanying recession.
J.P. Morgan's Natasha Kaneva team warns that the three factors supporting Brent's current stability—regional inventory surpluses, benchmark pricing distortions, and policy interventions—are essentially short-term buffers that cannot perpetually mask the true tightness of global supply. Once commercial inventories in the Atlantic basin deplete rapidly, the global market will be forced to rebalance under significantly tighter supply conditions, compelling Brent to be repriced upwards towards Middle Eastern spot prices. The current gap of over $55 between Brent and Dubai crude represents the largest upside risk premium hanging over global oil prices.
Bernstein similarly notes that the current implied oil price range from equity valuations is approximately $80 to $100, with a long-term price around $70, aligning with one-to-three-month blockade scenarios but lacking a long-term risk premium. "The market is also not pricing in a recession," Bernstein wrote.
For market participants, there is only one core variable: when the Strait of Hormuz will reopen. The answer to this question will ultimately determine the direction and ceiling for global oil prices in 2026.
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