Hormuz Closure Could Send Oil to $200 and Trigger Global Recession, Wood Mackenzie Warns

A prolonged closure of the Strait of Hormuz could become the most severe global energy supply shock in decades, with oil prices potentially nearing $200 per barrel in a worst-case scenario, according to new analysis from Wood Mackenzie.

The consultancy said more than 11 million barrels per day of Gulf crude and condensate production remains curtailed, while more than 80 million tonnes per year of LNG supply — roughly 20% of global supply — is still inaccessible to global markets.

“The Strait of Hormuz is the most critical chokepoint in global energy markets, and a prolonged closure would become far more than an energy crisis,” said Peter Martin, Wood Mackenzie’s head of economics. “The longer disruption persists, the greater the impact on energy prices, industrial activity, trade flows and global economic growth.”

In a new Horizons report, Strait Talking: Iran War Scenarios and the Future of Energy, Wood Mackenzie lays out three possible paths: a quick peace, a late-summer settlement, or an extended disruption lasting through the end of 2026.

Under its most optimistic scenario, the Strait reopens by June and the global economy largely returns to its pre-war trajectory by the fourth quarter. Brent crude would fall toward $80 per barrel by year-end and slide further to around $65 in 2027 as markets return to oversupply.

A more drawn-out “Summer Settlement” would keep the Strait largely closed until September, prolonging oil and LNG shortages through the third quarter and triggering a shallow global recession in the second half of 2026.

The most severe case is far darker.

If the Strait remains largely closed through year-end, Wood Mackenzie says Brent could approach $200 per barrel by the end of 2026, even as global oil demand falls by 6 million barrels per day in the second half. Diesel and jet fuel prices could climb toward $300 per barrel in major refining centers.

The global economy could contract by as much as 0.4% in 2026, marking only the third global recession this century, according to the report. The Middle East would be hit hardest, with regional GDP potentially shrinking 10.7%. EU GDP would fall 1.5% in 2026, while U.S. growth would drop below 1% in both 2026 and 2027.

The LNG outlook is also under pressure. Even in the quick-peace case, Wood Mackenzie expects LNG markets to remain tight through summer 2027 as Gulf export facilities recover and new supply projects face delays.

In an extended disruption, some of the Gulf’s 85 million tonnes per year of existing LNG capacity could be permanently lost, while roughly 75 million tonnes per year of projects under construction could face multi-year delays.

“Persistent supply uncertainty would accelerate efforts to diversify away from imported LNG, supporting coal resilience and faster growth in renewables and electrification across Asia and Europe,” said Massimo Di Odoardo, Wood Mackenzie’s vice president of gas and LNG research.

Wood Mackenzie said a prolonged crisis would likely push import-dependent economies in Europe and Asia to speed up electrification and reduce reliance on hydrocarbons, while boosting demand for non-Gulf suppliers, including U.S. LNG exporters.

“The consequences of an extended disruption would extend well beyond energy markets,” Martin said. “It would test the resilience of global trade, industrial supply chains and economic growth simultaneously.”

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