The severity of the global energy crisis resulting from the Iran war could yet push oil prices to $200 per barrel under a worst-case scenario, Wood Mackenzie said in a report published on Wednesday.
The crisis in the Middle East is currently preventing more than 11 million barrels of gulf crude and condensate from reaching the market each day and about 80 million tonnes per annum of liquefied natural gas supply, or about 20% of global supply, is also not moving.
The Wood Mackenzie research explores three scenarios - quick peace, summer settlement and extended disruption.
"The Strait of Hormuz is the most critical chokepoint in global energy markets, and a prolonged closure would become far more than an energy crisis," said Peter Martin, head of economics at Wood Mackenzie.
"The longer disruption persists, the greater the impact on energy prices, industrial activity, trade flows and global economic growth."
The most optimistic scenario sees a workable deal reached in the coming days and the reopening of the shuttered Strait of Hormuz in June, setting the global economy back on its pre-war trajectory by Q4 this year.
Crude oil prices would retreat under that scenario to about $80/bbl by the end of the year and down to $65/bbl in 2027 as the market returns to the oversupply situation it had faced prior to the war.
Under this scenario, global GDP growth would fall to 2.3% in 2026, down from 3% in 2025.
Under the summer settlement scenario, the current ceasefire would last but negotiations would extend until late summer, keeping the Hormuz Strait closed until September, Wood Mackenzie said.
In this scenario, there would be LNG supply shortages through Q3 resulting in a "shallow global recession" in H2 with global GDP growth falling below 2% this year.
The most severe scenario, which cannot yet be ruled out given weeks of apparent stalemate between the US and Iran despite a ceasefire, foresees closure of the Hormuz Strait until the end of the year, sporadic conflict and continuous supply disruption.
That could push Brent crude prices to nearly $200/bbl by the end of the year, even with a drop in global demand of 6 million barrels per day in H2.
Diesel and jet fuel prices could soar to nearly $300/bbl at major refining centers by the end of the year and the global economy would shrink by potentially 0.4% this year.
That economic contraction would be deepest in the Middle East, where GDP could contract 10.7% in 2026 while the EU and US would see contractions of 1.5% and less than 1% respectively.
China's economy would slow to a growth rate of 3%, the research said.
Import-reliant nations could intensify efforts to reduce consumption including through more aggressive pursuit of electrification.
While the immediate result of the crisis is higher prices, which may not yet have peaked, its longer-term impact could be lower fossil fuel prices if it pushes importers to faster electrification and renewables deployment, the report summary said.
"This outlook is, however, challenged by both the pace of the energy transition and higher energy costs for oil-importing economies that seek to reduce reliance on hydrocarbons," said Alan Gelder, senior vice president for refining, chemicals & oil markets at Wood Mackenzie.
Even under the mildest quick peace scenario, the LNG market will remain tight as far out as the summer of 2027, Wood Mackenzie said, with damage to repair at key Middle Eastern production facilities.
The report notes that the world is on course for eventual LNG oversupply with aggressive production facility construction that would take output to 50% more than current levels.
The Middle East crisis delays that oversupply situation rather than eliminating it, the report said.