Societe Generale’s Commodity Compass Analytics (CCA) team, led by Michael Haigh, Ben Hoffa and Jeremy Sellema, emphasizes that the dated Brent oil price of USD 141 per barrel reflects severe physical constraints due to persistent flow disruptions in the Strait of Hormuz. Their scenario work considers impacts ranging from controlled escalation to protracted conflicts and bottleneck closures, with Brent oil prices ranging from around $125 per barrel to potentially above $200 per barrel and only a gradual normalization of stocks by the end of 2026.
Oil shock scenarios and price paths
“In this week’s CCA, we are examining three new scenarios. The first (A) examines the implications of imposing a levy on ships transiting the Strait of Hormuz, including the economics of such a levy and its potential implications for future conflicts. Spread over approximately 21,900 tanker transits, this equates to an average fee of approximately $520,000 per vessel, equivalent to approximately $0.26 per barrel, based on our assumptions.”
“The second scenario (B) focuses on the conflict itself, assuming it will last from April to May, with a controlled escalation followed by a relatively quick resolution. In this scenario, oil prices continue to rise and demand destruction accelerates, driven by both higher prices and policy-driven consumption adjustments. When conditions finally normalize, countries will not only rebuild stockpiles to pre-war levels, but will also increase stockpiling beyond that level, prioritizing security of supply over security of supply price and providing ongoing price support. In this scenario, prices average $125 per barrel in April.”
“In the third scenario (C), the conflict escalates rather than a controlled escalation. This may require U.S. intervention on the ground and is likely to trigger a broader regional war, drawing Iran’s proxies into the conflict more directly. In this scenario, we assume that oil market disruptions will rapidly intensify, potentially including a short-term closure of Bab el-Mandeb.”
“Under these conditions, prices would rise sharply, averaging $150 per barrel and potentially exceeding $200 per barrel. While demand destruction would accelerate in response to higher prices, preemptive and strategic stockpiling would partially offset this effect, lifting the medium-term price outlook despite weaker consumption.”
(This article was created with the facilitate of an artificial intelligence tool and has been reviewed by an editor.)
