Wood Mackenzie warns prolonged Strait of Hormuz closure could trigger biggest energy shock in decades

By Romel S. Gurky

Global energy markets could face their largest supply shock in decades if the Strait of Hormuz remains closed for an extended period, according to a new report by Wood Mackenzie.

In its latest Horizons report, Strait Talking: Iran War Scenarios and the Future of Energy, Wood Mackenzie said more than 11 million barrels per day (b/d) of Gulf crude and condensate production is currently curtailed, while over 80 million tonnes per annum (Mtpa) of LNG supply, equal to around 20% of global LNG supply, remains inaccessible.

“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, head of economics at Wood Mackenzie.

The consultancy outlined three possible scenarios: Quick Peace, Summer Settlement and Extended Disruption.

Under the most optimistic “Quick Peace” scenario, the Strait reopens by June and Brent crude prices ease to around US$80 per barrel by end-2026 before declining further in 2027. Global GDP growth would slow to 2.3% in 2026, with recessionary impacts mainly confined to the Middle East.

In the “Summer Settlement” scenario, negotiations continue into late summer while the Strait remains largely closed until September. Oil and LNG shortages would persist through the third quarter of 2026, potentially pushing global GDP growth below 2%.

Read also: Middle East export collapse reshapes global oil flows, WoodMac says

The most severe “Extended Disruption” scenario assumes the Strait remains largely closed through the end of 2026 amid recurring tensions and renewed conflict.

Under this scenario, Brent crude prices could approach US$200 per barrel despite falling global oil demand. More than 11 million b/d of oil supply would remain offline, while diesel and jet fuel prices could rise toward US$300 per barrel in major refining hubs.

Wood Mackenzie estimates the global economy could contract by as much as 0.4% in 2026, marking the third global recession this century. Middle East GDP could shrink by 10.7%, while EU27 GDP could decline by 1.5%.

The report also highlighted risks to global LNG markets. Even under the Quick Peace scenario, LNG markets are expected to remain tight through summer 2027 as Gulf export facilities recover gradually and new supply projects face delays.

Under the Extended Disruption scenario, some of the Gulf’s existing 85 Mtpa LNG supply could be permanently lost, while around 75 Mtpa of LNG capacity under construction may face multi-year delays.

Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie, said persistent supply uncertainty could accelerate the shift toward renewables, electrification and alternative energy sources across Asia and Europe.

Wood Mackenzie added that prolonged disruption could reshape global energy trade flows, increase geopolitical risk premiums and accelerate efforts by importing countries to reduce dependence on hydrocarbons.

Editing by Alexander Ginting