Geopolitical Tensions Sustain Strait of Hormuz Restrictions, Oil Prices Expected to Surge

“We think the Strait of Hormuz remains largely closed for months yet, meaning shortages become more urgent and oil hits new highs this Summer,” states Piper Sandler’s recent note from its energy and macro teams. The bank remains unconvinced that a near-term resolution will restore maritime operations, projecting sustained disruptions with significant economic repercussions.

West Texas Intermediate Futures experienced volatility this week, retreating from recent peaks after a weekend of diplomatic speculation—including President Donald Trump’s claim of a negotiated Iran deal—before rebounding partially on Tuesday following announcements of U.S. military strikes in southern Iran. The operations targeted missile infrastructure and naval assets disrupting commerce in the Strait.

Piper Sandler underscores its skepticism about traffic recovery, estimating navigational flows through the strait will remain below 50% of pre-crisis levels in the near term. Meanwhile, geopolitical risks persist as Iran’s foreign ministry warns of added costs for Strait usage, signaling further barriers to normalization.

“The U.S. has been unwilling to press the fight,” the note highlights, citing concerns that Iran’s retaliatory measures could destabilize regional stability and exacerbate supply chain crises. Simultaneously, Tehran’s leadership resists concessions, leveraging perceived bargaining power to prolong hostilities.

Tracking data reveals vessel traffic in the strait—critical for over 20% of global oil shipments—plunged to near-zero levels following the escalation of hostilities. With WTI crude futures briefly surging to $120 per barrel earlier in the conflict, the market has since stabilized at $94, though Piper Sandler anticipates a renewed price surge as shortages intensify.

The analyst warns that prolonged disruptions would undermine recent financial market resilience, particularly as energy prices ripple across global supply chains. As the standoff enters its most volatile phase, the firm urges close monitoring of developments impacting both militarized shipping lanes and commodity markets.”

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