If the Strait of Hormuz opens after April, we cannot provide an accurate oil price forecast. We will have crossed too deep into the Rubicon. This will have been the largest oil supply outage in the history of the oil market by a magnitude of 4x. Fundamental market theories will no longer apply here because there’s no price for outright shortages. When a market runs out of fuel, it just runs out.

The oil market won’t rebalance at $95 per barrel. Oil prices will have to reach a level high enough to offset ~11 to ~13 million b/d of supply outage. Governments will have to mandate COVID-like demand reduction policies to depress demand. Even then, it will have only offset the supply outage and not pushed the oil market into surplus. On the geopolitical side, I fear that we have entered a phase of “getting worse before it gets better,” as both sides (the US and Iran) appear not to budge.

Zero-sum conflicts do not automatically escalate. They escalate when both sides reveal that losing is worse than fighting. That threshold has now been crossed. The United States has steadily expanded its operational scope—from airstrikes to a naval blockade, and now toward direct interdiction of Iranian oil shipments. Iran has responded symmetrically, moving from indirect pressure to direct control of maritime flows and kinetic enforcement against shipping.

These actions are not reluctant or reactive. They are signals of preference. Each side is demonstrating that it is willing to absorb the costs of escalation rather than accept an outcome that undermines its core objectives—its position in the balance of power. Once that preference is revealed on both sides, ceasefires lose their function as pathways to resolution. They become temporary pauses within a larger trajectory of competition.

What follows is not necessarily continuous war, but

recurrent escalation

: blockade followed by countermeasures, interdiction followed by retaliation, each step justified by the last and narrowing the space for restraint. External actors may push for de-escalation, and markets may demand stability, but those pressures cannot override the underlying structure—

the struggle over relative power

.