Chevron CEO Mike Wirth issued a stark warning at the S&P Global CERAWeek conference, stating that oil futures markets are failing to price in the severe physical supply shock caused by the ongoing closure of the Strait of Hormuz. Wirth emphasized that real-world consequences, including significant infrastructure damage and production outages, are not reflected in current futures curves, which he described as "uncertain," "unpredictable," and "volatile."
The closure has taken an estimated 6.5 to 9 million barrels of daily oil supply offline, with around 80% of that oil normally destined for Asia. S&P Global Energy's Kurt Barrow labeled the situation an "availability crisis," noting that some countries will simply have to go without oil. Tightness is already evident in diesel and jet fuel markets.
Oil prices have experienced extreme volatility. West Texas Intermediate (WTI) crude briefly spiked to $101 a barrel and Brent to $113 over the weekend on fears of U.S. strikes, only to tumble by roughly 11-12% on Monday after President Trump announced talks with Iran and paused threatened strikes. Prices rebounded sharply on Tuesday, with Brent climbing back above $102, after Iran's Foreign Ministry denied any negotiations were taking place.
The diplomatic situation remains tense and unclear. Trump had issued a 48-hour ultimatum to reopen the Strait, later pausing it for five days and suggesting joint management with Iran. Iran has stated the Strait will not return to its previous state and ruled out negotiations. Meanwhile, reports indicate new strikes on Iranian energy facilities.
Goldman Sachs revised its 2026 WTI price forecast upward to $79 per barrel from $72, anticipating the supply disruption will persist. Analysts, including Macquarie's Vikas Dwivedi, predict oil prices will likely stay in a $85 to $110 range until the Strait fully reopens. The global impact is spreading, with countries like Slovenia implementing fuel rationing, Chile planning significant price hikes, and Japan reviewing its supply chain.
