Hormuz blockade will drag on for months and drive oil to new records - Piper Sandler

Investment bank Piper Sandler doubted the imminent conclusion of a peace deal between the United States and Iran, CNBC writes, citing a note from analysts. In their opinion, the Strait of Hormuz will remain largely closed for months to come, and oil prices will reach new highs as early as summer.

Piper Sandler is highly doubtful that commercial shipping through the Strait of Hormuz will recover to at least 50% of pre-crisis levels - either next week or next month, CNBC reports.

"We believe the Strait of Hormuz will remain virtually closed for several more months. This means that [crude] shortages will become more acute and oil prices will renew highs as early as this summer," the strategists said in a note.

The bank's report also notes that the U.S. is "reluctant to force a conflict" in the Middle East, as the scale of Iran's response could have broader implications for its neighbors and cause further disruptions in global supply chains. At the same time, Iranian leaders are in no mood for any compromise as they believe they have leverage, CNBC quoted the note as saying.

The economies of several countries in the Middle East, Asia and Europe rely heavily on shipments through the Strait of Hormuz, which is particularly important for exports of oil and liquefied natural gas (LNG) from the Middle East to Asia. About one-fifth of the world's seaborne oil was transported through the narrow passage before the war, but since the escalation of the conflict in late February, traffic has fallen to almost zero.

At the start of the conflict in the Middle East, Brent crude futures were approaching $120 a barrel. If Piper Sandler's prediction of a new high comes true, it will deal a serious blow to the global economy and undermine the stock market recovery, which has emerged against the backdrop of a pullback in oil prices from the peak of the war, CNBC reports.

The cost of Brent declined in trading on Wednesday, Ma 27. July futures for the commodity fell by 2.4% to $97.2 per barrel, while futures for West Texas Intermediate (WTI) crude fell by 2.8% to $91.3 per barrel.

This article was AI-translated and verified by a human editor