Oh oh, Rystad Energy spokesman: U.S.-Iran Re-Escalation Could Drive Oil To $180 By August

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An acute re-escalation in the U.S.-Iran conflict and a prolonged blockage of the Strait of Hormuz could drive global crude oil prices to $180 per barrel by August, Jorge León, Head of Geopolitical Analysis at Rystad Energy, has projected on CNBC's Squawk Box Europe.

According to Rystad's León, this extreme bull-case scenario would materialize in the form of prolonged military strikes, physical damage to infrastructure or full Strait of Hormuz blockade. León says that whereas recent de-escalation talks and temporary ceasefires dropped Brent and WTI crude to the $85-$90 range, physical supply vulnerabilities remain highly elevated.

León estimates that it would take six to eight weeks for transit insurance markets to reprice, vessel operators to secure access and physical oil flows to normalize after a diplomatic resolution is reached, implying that any meaningful supply recoveries from any current structured pauses will not fully materialize at processing ports until late summer.

Rystad regards the current scenario as a middle of the road case, with the market pricing in short-term ceasefires, active diplomatic mediation going on and high operational uncertainty. However, León considers a de-escalation the bearish case for oil markets wherein a successful 30-day peace framework negotiation, gradual reopening of shipping lanes and returning Iranian crude would push oil prices down to the $70-80/bbl range.

Rystad is not alone. Back in March, Saudi Arabia warned that the effective closure of the Strait of Hormuz could drive oil prices up to $180 per barrel while several Wall Street analysts, including BNP Paribas, have projected oil prices in the $170-200/bbl range.

In contrast, Goldman Sachs commodity analysts on Monday projected that rapid demand destruction caused by high crude prices is heavily countering the risk of severe Middle East supply shocks. Goldman says that while geopolitical tensions and the prolonged closure of the Strait of Hormuz have triggered massive physical supply deficits, actual consumption has dropped much faster than anticipated, capping the potential upside for global oil prices.

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