We see that the estimated oil flows through the Strait of Hormuz are down 18mb/d, which corresponds to around 10% of normal levels, even below our pessimistic 15% assumptions. Net redirection via pipelines and the ports in Yanbu (Red Sea, Saudi Arabia) and Fujairah (Gulf of Oman, UAE) at only 0.9mb/d over the past four days (vs. a theoretical estimated 3.6mb/d potential.) The unprecedented size of the supply shock (today’s 17.1mb/d hit to Persian Gulf oil supply is 17 times larger than the peak April 2022 hit to Russia production) and the resulting speed of potential inventory depletion is likely to lead markets to start pricing demand destruction more quickly. All above facts point to Brent crossing $100/bl if there is no change in conditions next week. The main economic impact for most countries is that the recent rise in oil prices to around $80/bbl (on an average) will boost inflation and slow growth. We see a 0.2pp boost to global inflation (with core inflation impacts <0.1pp) & 0.1pp drag on global growth. Effects could be larger if Strait of Hormuz closes for an extended period. If oil price temporarily rises to $100/bl we estimate that global inflation could rise to 0.8pp & global growth could slow by 0.5pp. Almost all crude and crude product prices are higher by between 50-70% over past week. Brent (34%), European Natural Gas (100%), Jet fuel prices (70%), gasoline prices (22%) & shipping costs (70%). The world’s No.1 and No.2 LNG importing countries, China and Japan, have limited exposure to Qatar LNG exports. Instead, other importers most affected include Kuwait, Taiwan, Singapore, Bangladesh and India etc. Kuwait is the most exposed to Qatar’s LNG supplies. Over 80% of Kuwait’s total imports came from Qatar in 2025, which supplied 43% of Kuwait’s total natural gas demand. Pakistan and India sourced 74% and 48% of their LNG imports from Qatar in 2025. Only ~3% of Europe’s 2025 gas demand was supplied by Qatar LNG. In 2025, 37% of Europe’s gas consumption was supplied by LNG imports, ~60% of which came from the US. Russia LNG contributed to 13% of total European LNG imports, while Qatar only accounted for 8%. To summarise, all energy importing countries with heavy reliance on crude from Middle East or LNG from Qatar are likely to get impacted adversely if the Strait of Hormuz remains shut for another week. Brent has a high probability of breaching $100/bl this week itself if there is no change in conditions. We do not see either Iran or Trump using an off ramp under current scenario. We see higher risk of escalations next week itself. For TACO to come true, we need to see S&P falling below 6500 or Brent shooting above $120/bl. Till then crude & crude products remain higher for longer.
