[Editor’s Note: Follow the media live blog for the latest regional developments with the US-Israel-Iran ceasefire now in effect.]
Global oil markets are entering a critical phase as the prolonged disruption to shipping through the Strait of Hormuz threatens to push crude prices towards $150 a barrel, a level that economists warn could trigger significant economic pain across both energy-importing and energy-exporting nations.
Brent crude climbed back towards the $97 mark on Wednesday after fresh military action in the Middle East reignited concerns about supply disruptions in one of the world’s most important energy corridors. The August Brent contract was trading at $96.99 a barrel in early trading, while US benchmark West Texas Intermediate rose to $94.85.
While oil prices remain well below the triple-digit levels feared when the conflict first erupted, economists say the real test lies ahead as global inventories continue to decline.
According to a new assessment by Oxford Economics, the global oil market has so far weathered the crisis better than expected due to weaker demand, shifting trade flows and strategic inventory drawdowns. However, these buffers are rapidly diminishing.
Bridget Payne, head of Oil and Gas Forecasting at Oxford Economics, said the consultancy’s baseline scenario assumes an agreement is reached by the end of July to reopen the Strait of Hormuz before global inventories fall to dangerously low levels.
The narrow waterway connecting the Gulf to international markets handles roughly a fifth of the world’s oil consumption and remains the single most important chokepoint in global energy trade.
“If the US or Iran’s stance leads to a more prolonged closure of the Strait, OECD stocks could reach a critical threshold by mid-September, triggering a price spike towards $150 per barrel,” Payne said.
She warned that oil prices at such levels would be difficult for the global economy to absorb for an extended period.
“Prices at this level would create overwhelming pressure on both the US and Iran to allow traffic through the Strait to resume,” she added.
The warning comes as analysts increasingly focus on inventory levels rather than headline supply disruptions. Market participants believe the eventual reopening of Hormuz may be determined less by diplomacy and more by the pace at which global stockpiles are depleted.
Oxford Economics argues that inventory depletion could become the decisive trigger forcing all parties to seek a resolution.
So far, governments, refiners and traders have relied heavily on emergency stockpiles and alternative supply routes to cushion the impact of reduced Gulf exports. Additional crude supplies from producers outside the region, weaker global demand and logistical adjustments have also helped prevent a major supply shock.
However, Payne cautioned that these mechanisms have finite limits.
“The market has adjusted better than expected so far, with weaker demand, trade flow shifts and inventory drawdowns preventing major shortages. But these buffers are finite, and stocks do not need to reach zero before governments, refiners and traders become concerned about fuel availability,” she said.
The implications of a sustained oil rally would be profound.
For major importing economies such as India, Japan, South Korea and much of Europe, a move towards $150 oil would significantly increase inflationary pressures, widen trade deficits and potentially force central banks to delay interest-rate cuts.
India remains particularly vulnerable, importing nearly 90 per cent of its crude oil requirements. Every $10 increase in crude prices adds billions of dollars to the country’s annual import bill and places additional pressure on the rupee, which has already weakened sharply against the US dollar since the conflict began.
For Gulf economies, higher oil prices would boost fiscal revenues in the short term. However, economists warn that a prolonged period of exceptionally high prices could eventually damage global growth, weaken energy demand and create instability across financial markets.
 The warning from Oxford Economics echoes growing concerns among traders and investment banks that oil markets remain vulnerable despite recent signs of resilience. A Bloomberg Intelligence survey released earlier suggested that many market participants expect oil to trade between $81 and $100 a barrel over the next 12 months, although that outlook assumes the Strait of Hormuz eventually reopens and major supply disruptions are avoided.
For now, the market’s central assumption remains that diplomacy, economic necessity and dwindling inventories will ultimately force a reopening of the Strait.
But with OECD stockpiles steadily shrinking and geopolitical tensions showing few signs of easing, the risk of a dramatic spike towards $150 oil can no longer be dismissed as a remote possibility. Instead, it is increasingly emerging as one of the most significant threats facing the global economy in the second half of 2026.
