Piper Sandler expects the Strait of Hormuz to remain largely closed for months, causing urgent supply shortages and pushing oil prices to new highs this summer. The firm said there is very little confidence that commercial traffic will return to even 50% of pre-crisis levels in the near term, including next week or next month [1, 2].
The Strait of Hormuz is a critical shipping route, historically carrying about one-fifth of the world’s seaborne oil, especially exports from the Middle East to Asia. Tracking data shows vessel traffic through the Strait has fallen sharply to near zero since the conflict escalated [1, 2].
West Texas Intermediate (WTI) crude futures traded near $120 a barrel at the onset of the conflict earlier this year but have since dropped to around $94 a barrel with recent mixed signals on prospects for an Iran deal [1, 2]. Piper Sandler warned that if oil prices hit new highs as they expect, it could heavily impact the global economy and undermine the recent stock market recovery [1, 2].
The U.S. military conducted "self-defense strikes" on May 23 in southern Iran targeting missile launch sites and vessels laying mines near the Strait of Hormuz. The strikes came amid rising tensions in the region [1, 2]. On the same day, U.S. President Donald Trump said an agreement with Iran has been "largely negotiated," with details to be announced shortly [1, 2].
Iran’s foreign ministry has responded by saying navigation through the Strait of Hormuz "will have costs," and Iranian leaders believe they have leverage and are unwilling to compromise, raising concerns the closure could last for months [1, 2]. Meanwhile, the U.S. has shown reluctance to escalate the conflict further due to concerns about broader regional consequences and supply chain disruptions [1, 2].
Piper Sandler emphasized the strategic importance of the Strait and the potential for ongoing supply shortages and price shocks this summer if the closure continues. The next major update is expected as details of the Iran agreement are set to be announced soon, which may influence the situation around the Strait of Hormuz [1, 2].
