Analyst Predicts Crude Prices Will Breach $150

Macquarie strategist Vikas Dwivedi wrote in a recent client note that “a few weeks of Hormuz closure will create a domino effect of events that could push crude to $150 or higher,” Jake Conley reported for Yahoo Finance.

If the Strait of Hormuz remains unnavigable, production cuts could rise to 3.3 million barrels per day by day eight, 3.8 million barrels per day by day 15 and 4.7 million barrels per day by day 18.

In the week since US and Israeli air strikes began, what started as a localized conflict focused on destroying Iran’s nuclear capacity and potentially inciting regime change has widened into a war engulfing the Middle East.

Airports, apartment buildings, military bases and other infrastructure across Saudi Arabia, the United Arab Emirates, Bahrain, Oman and several other countries have been targeted by Iranian missiles and drone strikes.

The skies above Iran darkened over the weekend after fuel depots near the cities of Tehran and Karaj were hit by air strikes.

The conflict has also increasingly targeted energy infrastructure throughout the region, threatening a supply chain already pushed to its limits.

Bahrain’s Bapco Energies refinery has been attacked; Saudi Arabia’s Ras Tanura refinery has been taken offline; and Qatar’s Ras Laffan LNG complex has declared force majeure.

Oil tankers in the Persian Gulf have been struck by missiles and drones, and Iran’s Revolutionary Guards have threatened violence against any ship attempting to cross the strait—even as they declare the passage nominally “open.”

With nowhere to send their oil, producers have begun cutting back production, signaling a deeper supply shortage in the market.

Iraq has now cut 60% of its oil production, according to Bloomberg, and Kuwait has also begun shutting down production.

If the Strait of Hormuz remains unnavigable, production cuts could rise to 3.3 million barrels per day by day eight, 3.8 million barrels per day by day 15 and 4.7 million barrels per day by day 18, according to research from JPMorgan Chase analysts.