Piper Sandler has issued a note to clients stating that the Strait of Hormuz is expected to remain largely closed for months, which could result in oil prices reaching new highs this summer [1]. The investment bank expressed skepticism regarding reports of an imminent Iran deal, emphasizing that shortages are likely to become more urgent as the closure persists [1].
Recent developments include U.S. military 'self-defense strikes' in southern Iran, targeting missile launch sites and vessels placing mines around the Strait of Hormuz [1]. This followed statements from President Donald Trump, who claimed that an agreement with Iran has been 'largely negotiated' with details to be announced soon, while Iran's foreign ministry warned that navigation through the Strait 'will have costs' [1].
Piper Sandler reported very little confidence that commercial traffic through the Strait would return to even 50% of pre-crisis levels in the near term, either next week or next month [1]. The bank also noted that the U.S. has been 'unwilling to press the fight' due to concerns about the scale of potential Iranian retaliation and its broader implications for neighboring countries and global supply chains [1].
The Strait of Hormuz is a critical passage for oil and LNG exports from the Middle East to Asia, previously carrying about one-fifth of the world's seaborne oil. Tracking data indicates vessel traffic has fallen sharply to near zero since the escalation of the conflict [1]. WTI crude futures, which neared $120 a barrel at the onset of the conflict, were last trading around $94 a barrel. Piper Sandler's forecast of new highs in oil prices could significantly impact the global economy and potentially undermine the recent stock market recovery [1].
CONCLUSION
Piper Sandler's analysis points to a prolonged closure of the Strait of Hormuz, with oil prices likely to surge to new highs as a result. The situation poses significant risks to global supply chains and economic stability, with the potential to reverse recent gains in the stock market if oil prices spike as predicted.