As war prolongs and critical chokepoints face coordinated closure, analysts warn the global energy market is staring down a scenario that would shatter all previous price records.
Just weeks ago, the idea of oil reaching $250 per barrel was relegated to speculative "black swan" warnings. Today, with the Strait of Hormuz effectively closed, Iranian-aligned forces threatening the Bab el-Mandeb Strait, and global refining capacity in tatters, that nightmare scenario is moving from the realm of possibility toward a credible forecast.
The combination of a prolonged war, the strategic strangling of the world's two most critical maritime chokepoints, and a coordinated attack on global refining infrastructure has created the most severe supply shock in a generation. Here is what is at stake.
The Current Crisis: A Supply Shock of Historic Proportions
The situation has escalated far beyond a simple disruption. We are now witnessing a synchronized assault on both the flow of crude oil and the infrastructure required to turn it into usable fuel.
Refineries Under Fire
French Finance Minister Roland Lescure recently stated that Iranian retaliatory strikes have damaged or destroyed an estimated 30% to 40% of Gulf refining capacity. This represents a loss of approximately 11 million barrels per day (bpd) from global markets—a deficit so severe that repairs could take up to three years.
The International Energy Agency (IEA) has slashed its global refining throughput forecast for March 2026 by a staggering 4.3 million bpd, while also lowering its outlook for the entire year. The damage is not confined to the Gulf. In a single week in March, energy infrastructure was attacked on three continents:
Israel struck Iran's gas field.
Ukraine hit Russian refineries and export terminals.
A major explosion took the Port Arthur, Texas refinery (435,000 bpd) offline in the United States.
This global "triple crisis" has created a synchronized shock to supply that strategic reserves alone may not be able to contain.
The Two Straits: A Coordinated Stranglehold
The greatest threat to global oil prices lies in the potential coordinated closure of the world's two most vital maritime chokepoints: the Strait of Hormuz and the Bab el-Mandeb Strait. These are not redundant routes; they are sequential arteries. Closing both would trap supply and sever the world's primary alternative routes simultaneously.
Chokepoint Current Status Strategic Role Strait of Hormuz Effectively Closed by Iran, requiring permits with ~95% drop in normal traffic The exit gate for 20% of the world's oil. Its closure alone has created a ~9–11 million bpd supply gap. Bab el-Mandeb Under Active Threat; Iranian allies (Houthis) are positioned to close it The link to the Suez Canal, handling ~10–12% of global seaborne oil. It is the primary alternative route for oil escaping Hormuz via Saudi and UAE pipelines.
Why Two Closures Change Everything
Currently, with only Hormuz closed, Saudi Arabia and the UAE are using overland pipelines to reroute ~5–7 million bpd of oil to the Red Sea (Yanbu port) and the Gulf of Oman (Fujairah). This workaround has kept prices volatile but stable in the $100–$115 range.
If Bab el-Mandeb closes, those pipelines become useless. Oil arriving at Yanbu would have no way to reach European markets except by sailing around Africa—adding 15+ days of transit time and massive costs. The supply gap would balloon to 15–18 million bpd, representing nearly 20% of global supply with no ability to reroute.
Scenario supply Impact projected Price Impact current (Hormuz Closed)~9–11 million bpd gap; partially offset by pipelines$100–$115; could hit $150 if Hormuz remains closed another month dual Closure (Hormuz + Bab el-Mandeb)~15–18 million bpd gap; no viable rerouting options$200–$250+ ; would trigger global recession to force demand destruction
The SPR Release: A Temporary Bridge, Not a Solution
The U.S. Strategic Petroleum Reserve (SPR) is being deployed as the primary tool to combat price spikes. Currently, the U.S. is releasing 172 million barrels over 120 days (mid-March to mid/late July 2026) as part of a coordinated global release totaling 400 million barrels.
However, the scale of the current crisis is challenging its effectiveness. The 400 million barrel release would cover the current supply deficit for only about 33 days if it were the only source of oil. More critically, the SPR releases crude oil, but the current crisis is also a refining crisis. Even if crude is available, there may not be enough operational refineries to process it into gasoline, diesel, and jet fuel.
Crucially, the U.S. release is structured as a loan, not a sale. Energy companies receiving the oil are required to return it later, plus an 18% to 22% premium in extra barrels. This means the government expects to receive back approximately 200 million barrels—ending with more oil than it started with—at no net cost to taxpayers. However, repayment is not required until September 2028, meaning the oil will not be replaced for years.
The $250 Scenario: How We Get There
The path to $250 oil depends on whether the conflict moves from its current "refinery destruction" phase to a "full-scale infrastructure war."
Current Phase (Prolonged Refinery Outages): With 30–40% of Gulf refining capacity offline and the Strait of Hormuz effectively closed, the market is already in a severe crisis. Prices in this phase could reach $150 per barrel, with the physical price of jet fuel in Asia already nearing $228/barrel—double its pre-war level.
Worst-Case Phase (Energy Infrastructure War): If Iran expands its attacks to take out pipelines, export terminals, and processing plants across the region—or if Bab el-Mandeb is closed in coordination—the supply shock would become insurmountable. Rystad Energy has warned that if key infrastructure like Saudi Arabia's Yanbu port is destroyed, removing 5–6 million bpd, prices could exceed $150. A wider campaign across the region, combined with dual chokepoint closures, would push prices to $200–$250+.
The Final Cap: Demand Destruction
Why wouldn't prices go to $1,000? The market caps itself through demand destruction. At $250 per barrel, the price would be high enough to force governments to implement rationing, ban exports, and compel factories to close. The world would have to reduce oil consumption by an amount equal to the combined usage of Germany, France, the UK, Italy, and Spain. At that point, the economy slows down so much that demand falls to meet the reduced supply, creating a painful, unstable ceiling.
What to Watch
The next major inflection point will come on April 29, 2026, when Secretary of Defense Pete Hegseth meets with Congress to provide a war update. Key questions lawmakers are expected to ask include:
What is the status of the 20 oil tankers reportedly moving under Iranian permission?
Does the U.S. accept the reported IRGC-managed "toll booth" in the Strait of Hormuz?
How does the administration's oil price forecast impact the timeline and volume of the SPR release?
For now, the global energy market remains on a knife's edge. With the Strait of Hormuz already compromised and Bab el-Mandeb under threat, the difference between $100 oil and $250 oil may be measured in days—and in the decisions made in Tehran, Washington, and the capitals of the Gulf states over the coming weeks.
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