The oil market is shifting rapidly away from the simple question of whether the Strait of Hormuz reopens.
It is now focusing on the speed, scale, and durability of the recovery and on whether Saudi Arabia’s Red Sea outlet remains available while Persian Gulf exports have been forced lower.
Rystad Energy has mapped a range of potential scenarios to assess their impact on oil prices, including the implications of continued disruption in the Gulf and a further escalation of conflict in the Bab el-Mandeb Strait.
Here is Rystad Energy’s oil market update from Janiv Shah, Vice President, Commodity Markets – Oil, Rystad Energy; Dubai, United Arab Emirates:
"While oil flows through the Strait have fallen sharply since March, the market has so far been able to absorb the disruption through a combination of inventory drawdowns, alternative supply routes and spare production capacity.
The bigger question now is how long those buffers can continue to offset supply losses.
The market is no longer pricing risk based on geopolitics alone, it is focused on the resilience of physical oil flows.
If disruptions continue, oil prices are more likely to rise than they were earlier in the conflict. Much of the world's spare production capacity has already been used, while strategic and commercial oil inventories are lower than when the war began, leaving the market with fewer buffers against a prolonged supply disruption.
As the conflict evolves, the direction of prices will ultimately depend on three factors: whether crude flows into Asia can be maintained, whether refiners can adapt to a changing mix of crude grades and how geopolitical developments unfold.
The probability of higher prices increases as the conflict escalates, but the magnitude of that increase will depend on how these physical market dynamics play out."
Full resolution – 5%: Physical normalisation removes the premium
A full resolution requires rapid de-escalation, binding nuclear limits, sanctions relief and free passage.
Asian refiners regain access to suitable sour grades, and the high margin environment lifts refinery runs. Product cracks normalize as Gulf refinery output and exports return, though strong initial crude intake will slow Brent's decline.
Governments have little incentive to refill SPRs while the first export wave clears, but as the market loosens, that window becomes attractive for buying. This strategic buying, combined with recovering refinery demand, provides underlying support against further downside.
Narrow deal – 40%: Managed recovery and unresolved risk
The intensity of recent attacks declines in the coming days, and diplomacy again becomes the main channel of interaction.
An interim agreement restores trade without settling the nuclear issue or removing Iran's maritime leverage. The path includes a geopolitical risk premium and a lag while Gulf tanks are cleared, loading programs are rebuilt, and shipping confidence is restored.
Margins stay elevated during the transition as Asia competes for Persian Gulf sour barrels, US refiners lean harder on Canadian and South American heavy grades, and Europe absorbs more light sweet crude while competing for middle distillates.
Strong cracks support crude demand wherever feedstock is available, with SPR refilling providing an additional source of demand once the market stabilises.
Stalemate – 35%: The world learns to trade around the threat
The intensity of recent attacks declines in the coming days, but less sharply than in the narrow-deal case.
Saudi exports from the Yanbu port remain critical here: around 4 million bpd exits the terminal, with approximately 2.5 million bpd continuing south through Bab el-Mandeb. This case assumes the route stays operational, although current threats and recent attacks keep freight and insurance costs elevated.
If current market flow dynamics persist and worsen, prices are likely to rise in the coming weeks given the global crude and liquids balance deficit. SPR releases can cap spikes but cannot correct the crude slate mismatch. Asian refineries short of sour feedstock may cut runs even when light sweet barrels are available, preventing high margins from generating a full supply response and keeping diesel and jet cracks strong. Cracks would likely shift across the product slate, with lighter products weakening as strength concentrates toward the middle of the barrel. Europe and complex US refiners would likely compete more aggressively for Atlantic and heavy sour barrels.
Strategic stocks are unlikely to be refilled immediately in this scenario, making each flare-up more price-sensitive.
Fighting restarts – 20%: Two waterways close and the deficit overwhelms market buffers
This case represents sustained escalation. Negotiations collapse, direct US-Iran fighting continues and broadens, and regional actors and Persian Gulf energy infrastructure face increasing spillover risk.
Bypass flows have further downside as the Houthis close Bab el-Mandeb. Saudi exports moving south from Yanbu therefore fail to reach their intended markets, removing the main outlet that had offset lost Hormuz traffic.
Some Yanbu barrels can move north through the Suez Canal and the Suez-Mediterranean (SUMED) pipeline, but this is not a full replacement.
Fully laden very large crude carriers (VLCCs) face draft and size limitations on this route, requiring Suezmax or smaller vessels, partial loading, or additional handling through SUMED.
Constraints on vessel availability, port and pipeline capacity, and freight costs — plus the diversion of barrels away from Asian buyers — mean the full volume cannot be rerouted from south to north, although European refiners stand to gain from this flow shift.
A wide geopolitical premium is further driven by the combined physical loss across Hormuz and Bab el-Mandeb flows, compounded by refinery feedstock shortages and persistent stop-start Gulf product exports.
As crude and product tanks fill across the Middle East, the resulting back pressure forces deeper upstream shut-ins than in early March.
Refinery margins and product cracks rise sharply but fail to translate into additional supply. Asian refiners cannot easily replace Gulf sour crude, while the loss of Middle Eastern diesel and jet exports tightens an already exposed product market. Strong cracks support crude purchases, but refinery economics will not fully convert into actual runs in this case.
Coordinated SPR releases become likely, but usable stocks are limited by location, crude quality, and refinery compatibility. Previous SPR releases have already drawn down global stocks, in some cases to minimum levels, so the market enters this phase with fewer buffers available.
Meanwhile, severely elevated crude and product costs destroy demand across road fuels, aviation, petrochemicals, and price-sensitive emerging markets. These effects, combined with non-Gulf supply growth and limited trade adaptation, will ease crude markets through 2027.