$200 Oil by June?—The Biggest Oil Shock in History | Rory Johnston on The Hormuz Crisis

Key Takeaways

• Strait closure removed ~13 million bpd; rerouting cut flows and OECD commercial stocks (~2.5–3.0bn) could be rapidly drawn down, forcing sharp price adjustments.
• Futures term structure shows deep backwardation and prompt premiums; models price Brent near $100 quickly and project up to $200 if inventory draws persist into June.
• Markets may be underreacting—verbal interventions and political tweets suppressed traders’ willingness to price future shortages, delaying market pressure to resolve the blockade.
• Physical constraints matter: tanker transit delays, reroutes, and limited spare capacity mean local shortages and slow arbitrage can persist for months despite global production capacity.
• Sustained high oil prices accelerate electrification and substitution; rapid EV adoption in Asia could bring peak oil demand within a decade to the mid‑2030s.
• Distributional impacts are regressive: advanced economies and producers are relatively insulated while poorer countries bear most pain, raising political pressure once pump prices spike.
• Natural gas prices likely rally amid an energy shock; some market participants may shift focus to gas as energy-intensive technologies (like AI) raise structural demand.

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