![\"Ships](\"https:\/\/dailybusinessgroup.co.uk\/wp-content\/uploads\/2026\/05\/Ships-in-Strait-of-Hormuz-bbc-vid.png\")
A prolonged closure of the Strait of Hormuz could see oil prices hit $200 a barrel and see the global economy shrink by 0.4%, according to a new report from leading energy analyst Wood Mackenzie.<\/p>\n
Such an outcome would mark the third global recession this century, with \u201csignificant economic scarring\u201d, it says.<\/p>\n
The warning came amid renewed hope of a peace agreement which saw prices ease by 6% to just below $105 a barrel. However, analysts have become weary of President Trump\u2019s promises of a settlement.<\/p>\n
\u201cIt feels like we have been here before multiple times in recent weeks,\u201d said AJ Bell head of financial analysis Danni Hewson. <\/p>\n
\u201cThat\u2019s reflected in the relatively modest pullbacks in crude. Government bond yields, while still elevated, have also come back slightly on renewed optimism over peace talks.\u201d<\/p>\n
The WoodMac report, Strait Talking: Iran War Scenarios and the Future of Energy<\/em>, says a quick deal could see oil prices fall to $65 a barrel next year.<\/p>\n However, it notes that more than 11 million barrels per day of Gulf crude and condensate production is currently curtailed.<\/p>\n More than 80 million tonnes per annum of LNG supply, equivalent to around 20% of global supply, remains inaccessible to global markets.<\/p>\n \u201cThe Strait of Hormuz is the most critical chokepoint in global energy markets, and a prolonged closure would become far more than an energy crisis,\u201d says Peter Martin, head of economics at WoodMac. <\/p>\n \u201cThe longer disruption persists, the greater the impact on energy prices, industrial activity, trade flows and global economic growth.\u201d<\/p>\n WoodMac\u2019s report outlines three scenarios \u2013 Quick Peace, Summer Settlement and Extended Disruption.<\/p>\n Quick Peace<\/strong><\/p>\n Under the most optimistic \u2018Quick Peace\u2019 scenario the Strait reopens by June. The global economy broadly returns to its pre-war trajectory by Q4 2026.<\/p>\n Crude prices fall sharply following a deal, with Dated Brent easing to around $80\/bbl by end-2026 and declining further to $65\/bbl in 2027 as the oil market returns to oversupply.\u00a0<\/p>\n Global GDP growth slows from 3% in 2025 to 2.3% in 2026, with a recession limited to the Middle East. The global economy broadly returns to its pre-conflict trajectory by Q4 2026.<\/p>\n Summer Settlement<\/strong><\/p>\n The \u2018Summer Settlement\u2019 scenario assumes the Strait remaining largely closed until September.<\/p>\n Oil and LNG supply shortages persist through Q3 2026, driving a shallow global recession in H2 2026. Global GDP growth falls below 2% in 2026, resulting in modest yet permanent economic scarring compared to the pre-war baseline.<\/p>\n Extended Disruption<\/strong><\/p>\n Under the most severe scenario, the Strait remains largely closed through the end of 2026, with recurring tensions triggering periods of renewed conflict and sustained supply disruption. Wood Mackenzie\u2019s analysis indicates:<\/p>\n The regional economic impact would be severe and uneven. The Middle East could see GDP contract by 10.7% in 2026, while EU GDP declines by 1.5% in 2026 and 0.5% in 2027. US GDP growth would fall below 1% in both years, while China\u2019s GDP growth slows to 3% in 2026.<\/p>\n LNG market faces prolonged disruption and structural change<\/strong><\/p>\n The report finds the global LNG market faces varying degrees of disruption under each of the three scenarios.<\/p>\n Even under Quick Peace, LNG markets remain tight through summer 2027 as Gulf export facilities recover gradually and construction delays slow the next wave of supply growth from the region.<\/p>\n Energy plan<\/strong><\/p>\n Offshore Energies UK has called on the new Scottish Government to publish a refreshed energy strategy within its first 100 days.<\/p>\n David Whitehouse, OEUK Chief Executive, said: \u201cScotland has a world-class energy system spanning oil and gas, offshore wind, hydrogen and carbon capture, but without clear, consistent policy, we risk losing investment, jobs and industrial capability at a critical moment.<\/p>\n \u201cClosures at Grangemouth and Mossmorran show what is at stake. Scottish support for Scottish industry matters. That is why we should build on our strengths, not treat them as a political inconvenience.<\/p>\n \u201cA refreshed energy strategy within the first 100 days would send a clear signal that government is serious about backing a modern industrial Scotland, secured by homegrown energy \u2013 bringing down costs, unlocking investment and keeping industry here.\u201d<\/p>\n Chancellor curbs fuel prices<\/strong><\/p>\n The\u00a0UK Government\u00a0\u00a0has announced that a freeze on a fuel duty\u00a0increase will\u00a0be extended\u00a0for the rest of the year.\u00a0<\/p>\n The Treasury says this ensures fuel duty on petrol and diesel\u00a0remains\u00a0at its lowest rate for over 16 years.\u00a0<\/p>\n The Chancellor is giving hauliers a 12-month road tax holiday \u2013 meaning they will pay \u00a31 at renewal, saving \u00a3600\u00a0for a typical heavy lorry and \u00a3912\u00a0for the biggest vehicles on the road.\u00a0<\/p>\n Farmers, rail freight, and other red diesel users will also see their fuel duty cut by over a third until the end of the year. This is the lowest rate in over 20 years, helping to keep the cost of doing business down at\u00a0a difficult time\u00a0when red diesel prices are around 50% more than their pre-crisis\u00a0levels.\u00a0<\/p>\n Chancellor Rachel Reeves said:\u00a0\u201cThe war in Iran\u00a0is pushing up\u00a0fuel\u00a0prices\u00a0here at home\u00a0but after\u00a0strong growth\u00a0at the beginning of the year, I\u00a0am stepping in to\u00a0protect people at the pump.\u201d<\/p>\n \t <\/div>\n\n