Dated Brent is stated at $141/bbl, linked to tight physical supply while flows through the Strait of Hormuz remain impaired. Scenario modelling covers outcomes from controlled escalation to prolonged conflict and chokepoint closures, with Brent ranging from about $125/bbl to above $200/bbl, and inventories only returning towards normal into late 2026.
Scenario A considers tolls on vessels using the Strait of Hormuz. Based on about 21,900 tanker transits, the implied average charge is about $520,000 per vessel, equal to roughly $0.26/bbl.
Market Setup And Scenario Framework
Scenario B assumes the conflict lasts through April into May, with controlled escalation followed by a relatively quick resolution. Under this case, prices in April average $125/bbl, with demand falling due to higher prices and policy-led consumption changes.
Scenario B also assumes countries rebuild inventories to pre-war levels and then add extra stockpiles, supporting prices. Scenario C assumes a sharper intensification, including U.S. troops on the ground and a wider regional war, with possible short-term closure of the Bab el-Mandeb.
In Scenario C, prices average $150/bbl and may exceed $200/bbl. Demand destruction increases, while precautionary and strategic stockpiling offsets part of the consumption decline.
With Dated Brent now at $141 a barrel, we are in a state of severe physical tightness because flows through the Strait of Hormuz remain impaired. The latest EIA report confirmed this tightness with a surprise draw of 4.2 million barrels, pushing U.S. commercial crude inventories to their lowest level since late 2025. This scarcity means any further disruption will have an immediate and oversized impact on price.
Trading And Risk Signals
For the coming weeks, we should anticipate a controlled escalation of the conflict lasting through April and May. This base case suggests prices will average around $125 per barrel for the month, creating opportunities to position for sustained high prices. Buying call spreads or simply holding long futures positions seems prudent, as dips will likely be short-lived.
Even after a resolution, we expect countries will aggressively rebuild and expand strategic stockpiles, prioritizing energy security over cost. This sustained demand for inventory will provide a strong floor under prices, likely preventing a significant correction until well into late 2026. Looking back at how nations bolstered strategic reserves after the oil shocks of the 1970s, we see a clear historical precedent for this behavior.
The primary risk is an uncontrolled escalation, which could involve a wider regional war and a temporary closure of the Bab el-Mandeb strait. Under this scenario, we could see prices average $150 and spike above $200 per barrel. Therefore, holding some far out-of-the-money call options as a tail-risk hedge is a necessary strategy.
Traders should monitor real-time indicators of risk, such as tanker insurance premiums and freight rates. War risk premiums for vessels transiting the Gulf have more than quadrupled in the past month, a surge not seen since the tanker tensions of 2019. The Cboe Crude Oil Volatility Index (OVX) is trading above 70, reflecting the market’s extreme anxiety over a potential supply shock.
