Strait of Hormuz Disruption to Persist Through Year-End, OPEC+ Briefed
Four months into the closure, energy markets face structural repricing as central banks navigate stagflation and AI infrastructure costs surge.
Internal OPEC+ briefings indicate supply disruptions from the Strait of Hormuz closure will persist through the end of 2026, regardless of when the waterway reopens, according to TT News.
The assessment marks a shift from acute supply shock to sustained structural disruption. Since Iran effectively closed the strait on February 28 following US-Israeli airstrikes and the assassination of Supreme Leader Ali Khamenei, production among OPEC members has fallen 9.7 million barrels per day — a 30% decline. Shipping through the strait, which normally handles 20 million barrels per day, averaged just 3.8 million barrels per day in early April, per the International Energy Agency.
The timeline for normalisation has extended well beyond initial market expectations. “Oil flows from the Middle East won’t fully recover until well into 2027 even if the Iran conflict ends immediately,” Sultan Al Jaber, CEO of ADNOC, stated in the OPEC+ briefing.
The Stagflation Dilemma
Central Banks face a brutal choice between controlling inflation and avoiding recession. Core inflation held above 3% in February, with headline inflation forecast to climb from 2.1% in 2025 to 2.6% in 2026, according to Vanguard. Oil Prices above $100 per barrel through April created what Vanguard termed a “classic stagflationary shock” — simultaneous inflation acceleration and growth deceleration.
The IMF downgraded global growth projections to 3.1% for 2026 and 3.2% for 2027, assuming the conflict remains limited in scope. The US Energy Information Administration expects global oil inventories to fall by 8.5 million barrels per day in Q2 2026, keeping Brent around $106 per barrel through May and June before declining to $89 per barrel in Q4 — still $19 above pre-crisis levels.
“The kind of interest rates that are needed to actually stop people filling up their car, to stop people flying, would be seriously high, very, very high — and recession-inducing.”
— Julian Howard, Chief Multi-Asset Investment Strategist, GAM Investments
The policy response has been cautious. Rather than aggressive rate hikes to combat energy-driven inflation, major central banks have opted to absorb the price shock and accept higher inflation readings. The alternative — rates high enough to destroy demand — would trigger deep recession.
AI Infrastructure Collides With Energy Shock
The supply disruption has intersected with surging electricity demand from artificial intelligence data centers, creating compounding pressure on energy prices. Electricity prices jumped 6.9% year-over-year in 2025 — more than double the 2.9% headline inflation rate — with AI data centers accounting for 40% of demand growth, Goldman Sachs reported.
As AI systems transition to always-on agentic models, data center energy draw is projected to rise 14-fold by 2028, reaching 12% of total US electricity consumption. This structural demand shift is driving record utility capital expenditure: aggregate spending for 46 tracked companies is forecast at $1.295 trillion for 2026-2030, with annual capex growing from $108.4 billion in 2026 to $112.5 billion in 2028, per S&P Global Market Intelligence.
Throughout 2025, power requirements for large language model clusters provided a floor for natural gas prices even before the Strait closure. The convergence of kinetic supply shock and digital demand has created a unique energy market dynamic with no recent historical precedent.
Sector Realignment Accelerates
Energy sector consolidation and portfolio rebalancing have accelerated in response to the sustained price environment. Power and utilities M&A deal value grew approximately 57% from 2024 to 2025, with further acceleration expected in 2026 driven by AI data center power requirements and the need for dispatchable generation capacity.
The crisis has fundamentally altered the geopolitical risk premium embedded in fossil fuel pricing. Lux Research notes that disruptions to the Strait of Hormuz have shifted the risk premium from cyclical to structural, forcing systematic repricing across asset classes. Commodities allocation in institutional portfolios has increased as investors hedge against persistent geopolitical volatility.
Corporate hedging strategies have shifted accordingly. Energy-intensive industries are locking in forward contracts at elevated prices rather than betting on near-term normalisation, while airlines and logistics companies are revisiting fuel surcharge structures.
- Supply normalisation timeline extends into 2027 regardless of conflict resolution
- Central banks absorbing inflation shock rather than risking recession via aggressive tightening
- AI Infrastructure costs rising as energy shock compounds structural demand growth
- Geopolitical risk premium transitioning from cyclical to structural pricing component
- Utility capex acceleration and energy sector M&A driven by dual supply-demand pressures
What to Watch
Near-term price direction hinges on three factors: progress in ongoing peace negotiations between the US and Iran, the speed at which shipping insurance markets normalise after any reopening, and whether OPEC+ members can restore production capacity that has been offline for four months. The EIA’s forecast of $89 per barrel by Q4 assumes gradual reopening beginning in June — a timeline that now appears optimistic.
Longer-term, the intersection of geopolitical risk and AI-driven demand is forcing energy market participants to reassess baseline assumptions. Former senior Biden energy advisor Amos Hochstein projects oil prices will remain in the $90-100 range through the rest of 2026 and into 2027 even with early June reopening. That range represents a new floor, not a ceiling.
For central banks, the question is whether this energy shock proves transitory enough to tolerate or persistent enough to require demand destruction. Current policy suggests they’re betting on the former while preparing for the latter.