$200 Oil Price Threat: What It Means for Investors and Businesses in Oman
Iran’s warning that oil prices could surge to $200 a barrel may seem exaggerated, but as the energy crisis continues, this scenario appears more plausible than U.S. President Donald Trump’s assertion that prices will soon return to pre-conflict levels.
In its third week, the joint Israeli-U.S. conflict with Iran has escalated into a regional war with surprisingly limited impact on global oil benchmarks. Brent crude is currently trading near $100 a barrel, approximately 65% higher than at the start of the year. While this price was unimaginable just weeks ago, it remains below last Monday’s brief peak of nearly $120.
Despite the effective closure of the Strait of Hormuz—which handles about 20 million barrels per day, or one-fifth of global oil supply—crude prices have not surged more dramatically, though they arguably should.
Brent prices dipped slightly Monday, following reports that some tankers carrying crude and oil products to India, China, and Pakistan safely transited the strait recently. However, these volumes are minimal.
Market participants seem to be giving President Trump the benefit of the doubt, wagering that the crisis will subside quickly and that the Strait of Hormuz will reopen soon. This optimism, dubbed the “Trump put” or “TACO trade,” hinges on the belief that Trump can limit market damage.
“When this is over, oil prices are going to go down very, very rapidly,” Trump said Monday. But this optimistic outlook increasingly clashes with unfolding realities—both on the battlefield, where fighting intensifies, and in physical markets, where supply bottlenecks are worsening.
Physical crude markets are signaling severe stress ignored by paper markets. For example, Omani crude, exported near the Strait of Hormuz, currently trades at a record premium of $51 a barrel over Brent, compared to an average of just 75 cents in February. This premium pushes Omani crude prices to around $150 a barrel for May delivery. Similarly, Dubai crude cash premiums soared to $56 a barrel from 90 cents in February, highlighting profound uncertainties about supply amid repeated Iranian attacks on oil terminals in Oman and at Fujairah, the UAE’s main export point outside Hormuz.
This situation presents a significant challenge for refiners, particularly in Asia, which depends on the Middle East for roughly 60% of its crude imports. With a Gulf-to-Asia shipment taking about a month, every day the strait remains closed widens the supply gap. Asian refiners are already reducing processing rates to conserve dwindling stocks. China’s Sinopec, the world’s largest refiner, reported plans to cut throughput this month by more than 10% due to crude shortages. China and Thailand have imposed bans on refined fuel exports, which may tighten global markets further.
Refined fuel prices are soaring amid growing crude scarcity. Asian jet fuel prices approach $200 a barrel, near the record high of about $220 reached earlier this month.
The crisis extends beyond Asia. Europe, which accounted for roughly three-quarters of Middle Eastern jet fuel exports shipped via Hormuz last year (about 379,000 barrels per day), has seen no shipments transit the strait since fighting began. Consequently, jet fuel barges in the Amsterdam-Rotterdam-Antwerp hub hit a record $190 a barrel, surpassing the peak observed right after Russia’s full-scale invasion of Ukraine in February 2022.
The current supply disruption dwarfs the aftermath of the Ukraine crisis. Before the Ukraine invasion, Russia accounted for about 30% of Europe’s crude and a third of its refined product imports. Concerns over losing this supply pushed Brent prices to $130 a barrel despite the worst-case scenario not fully materializing.
According to Morgan Stanley, the physical supply disruption from the Iran conflict is more than three times greater than that feared from the Ukraine crisis. Although the oil market entered the conflict with a surplus—Global supply was projected to exceed demand by 3.7 million barrels per day—the current disruption has erased this glut.
The International Energy Agency’s announcement of a record release of 400 million barrels from strategic reserves cushioned the initial impact but cannot replace the need for fresh supply. Even if Hormuz reopens immediately, restoring around 10 million barrels per day of shut-in Middle Eastern production will take weeks or months.
In summary, the supply shock is substantial and likely to persist. While reopening the strait could cause an initial price drop, the harsh realities of physical markets suggest traders should be cautious about betting on a swift return to normality, contrary to President Trump’s assurances.
(Opinions expressed here are those of Ron Bousso, Reuters columnist.)
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The ongoing Iran-Israel-U.S. conflict and the effective closure of the Strait of Hormuz have dramatically tightened oil supply, sending Omani crude prices to unprecedented premiums and signaling a severe supply shock. For businesses in Oman, this creates both a strategic opportunity to capitalize on premium pricing and a risk of regional instability disrupting exports further. سرمایهگذاران و کارآفرینان هوشمند باید در نظر بگیرند diversifying supply chains and investing in energy security solutions to mitigate the risks of prolonged market volatility and potentially capitalize on high energy prices.
