Eight weeks have now passed since US and Israeli strikes on Iran. This led to the ongoing blockade of the Strait of Hormuz, a key chokepoint for the global oil market with roughly 20m b/d of oil moving through the strait prior to the war.
After considering the diversion of some oil via pipelines and the trickle of tankers still making it through the Strait of Hormuz, around 14m b/d of oil supply is currently disrupted. Over the first 2 months of the conflict, around 850m barrels of supply have been lost. Clearly, the disruption grows every day that passes without a resolution.
While Iranian oil had been moving through the Strait of Hormuz largely unaffected, the US blockade poses some risk to these flows. Prior to the blockade, we were estimating Iranian oil exports of around 1.5m b/d.
In our base case, we initially assumed that we would start to see a gradual resumption of flows through the Strait of Hormuz in April. However, this has clearly not materialised. Therefore, we are updating our base case assumptions and, as a result, revising higher our ICE Brent forecasts.
We are now assuming that oil flows through the Strait of Hormuz will slowly start resuming in May and June, and remain below pre-war levels for most of the year. This longer return allows for the gradual resumption of upstream production, which has had to shut-in due to storage constraints. It also allows for potential infrastructure damage, which could further slow the return to pre-war levels.
Our new base case sees ICE Brent averaging $104/bbl ($96 previously) over 2Q26, while the significant inventory drawdown and slow recovery towards pre-war flows sees Brent averaging $92/bbl ($88/bbl previously) over 4Q26.
Low inventories and the need to restock, whether commercial or strategic reserves, also suggests that oil prices will remain relatively well supported for the foreseeable future.
The upside risks to this assumption are a near full closure of the Strait of Hormuz persisting through May, which would likely see Brent finding a floor above $100/bbl for the remainder of the year. This is aligned with our scenario 2. However, a more significant risk lies in a renewed escalation that could nearly halt oil supply through the end of the second quarter. Under this scenario, Saudi crude shipments via the Red Sea and UAE exports from Fujairah would also be disrupted, potentially driving oil prices to new record highs.
This is aligned with our more aggressive, scenario 3.