CICC: US-Iran Tensions Spread, Upgrading Oil Price Center Forecast

CICC Finance APP has learned that CICC released a research report stating that last week, the geopolitical conflict between the U.S. and Iran continued to escalate, directly impacting multiple oil and gas facilities in Iran and surrounding Middle Eastern oil-producing countries. Global oil and gas supply may be facing disruptions. Under the baseline scenario, CICC expects the disruption of Strait of Hormuz trade to end within two weeks, leading to an upward adjustment of the Brent oil price center forecast for Q1-Q4 2024 to $75, $80, $75, and $72.5 per barrel. In a risk scenario, if the Strait of Hormuz trade remains interrupted into Q2, CICC suggests the Brent oil price center could rise above $120 per barrel by Q2 2026, potentially causing significant depletion of commercial crude inventories and forcing OECD countries to release SPR; looking further ahead, excessive oil price increases may suppress demand and lead to a market rebalancing, with Brent prices in the second half of the year possibly falling back to $70-$80 per barrel.

CICC Key Views:

U.S.-Iran Conflict Continues to Escalate, Supply Surplus May Have Reversed

Last week, the U.S.-Iran geopolitical conflict continued to intensify, directly affecting multiple oil and gas facilities in Iran and neighboring Middle Eastern countries, potentially disrupting global oil and gas supplies. According to Bloomberg and others, Saudi Arabia’s Ras Tanura refinery was attacked, losing about 550,000 barrels per day of refining capacity; Bahrain’s Sitrah refinery was attacked, losing about 448,000 barrels per day; Kuwait, due to storage constraints and potential attack risks, was forced to shut down some refineries, involving about 1.4 million barrels per day of capacity. According to the IEA, Middle Eastern refining capacity in 2025 is approximately 12 million barrels per day, about 11% of the global total; based on incomplete statistics, current refinery capacity losses have reached about 20%. On the natural gas front, Qatar’s Ras Laffan energy facilities were attacked, and QatarEnergy announced a halt to LNG and related product production. Reuters reports that Qatar’s LNG exports in 2025 account for nearly 20% of global supply. Regarding transportation infrastructure, the UAE’s Fujairah oil terminal, a key regional hub for refined products and fuel oil, may have suffered damage after the attack.

In the March 1 report “Oil: U.S.-Iran Escalation Alters Excess Supply Expectations,” CICC noted that this escalation could further increase geopolitical supply risks, differing from previous declines in Venezuelan and Russian crude exports that eased oversupply pressures. If Iran’s crude production and exports are directly impacted, the global oil surplus could end earlier; if the market prices in damage to Iranian supply and limited regional disruptions, the upside for oil prices could be $10-$15 per barrel, with a short-term reasonable trading range for Brent at $80-$85. Currently, CICC believes that the supply disruptions and heightened expectations have become a fact last week, and short-term oil price gains have been realized. Even if geopolitical tensions ease later, CICC expects that the energy supply recovery from Iran and other Middle Eastern major producers will take time, and the previously anticipated global oil oversupply may no longer materialize.

Initial Signs of Trade Disruption, Spillover Risks Rise

CICC’s previously warned extreme risk scenarios have also progressed unexpectedly. According to shipping data, oil transit through the Strait of Hormuz plummeted from 19 million barrels per day on March 1 (the day before the conflict) to 540,000 barrels per day, and further down to 30,000 barrels per day on March 2. From March 3 to 5, trade volume was zero for three consecutive days. On March 6, the Joint Maritime Information Center confirmed that the Strait of Hormuz was nearly completely halted, with Brent crude prices soaring 8.5% to break above $90 per barrel—first time since April 2024; the 1-12 month spread widened to over $20 per barrel, roughly comparable to the level during the Russia-Ukraine conflict in 2022. CICC considers this as an initial pricing of the potential disruption of Hormuz oil trade.

In the short term, CICC believes that the persistence of the Strait of Hormuz trade blockade will be a decisive factor in oil price upside potential and could also trigger broader supply shocks. According to the IEA, nearly 70% of Middle Eastern crude exports depend on the Strait of Hormuz, with Iran’s dependence at 100%, Saudi Arabia and Iraq at about 90%, Kuwait and UAE at around 60%. Bloomberg reports that due to export disruptions and depletion of storage capacity, Iraq, Kuwait, and UAE have announced they may be forced to cut crude output. If the trade remains interrupted and leads to further production cuts by Saudi Arabia and other major producers, the risk of global oil shortages could significantly increase. OECD commercial crude inventories, currently at relatively low levels, may face unexpected depletion, mirroring the inventory drawdown during the early COVID-19 pandemic in 2020. Short-term upside for oil prices could resemble the initial phase of the Russia-Ukraine conflict in 2022.

On the demand side, markets highly dependent on Middle Eastern and Hormuz Strait oil supplies, especially in Asia, will be most affected. The IEA states that nearly 80% of Hormuz Strait crude exports go to Asia, with Japan and India being the most reliant—69% and 64%, respectively, with both countries’ crude import dependence at 100%. Bloomberg reports that last week, some Japanese and Indian refineries announced that their oil product exports might be affected.

Geopolitical Supply Shock Spreads, Upward Revision of Price Center Forecasts

Given the substantial impact of this U.S.-Iran conflict on Middle Eastern crude supply, even if supplies recover later, risk premiums may not fully unwind, and the oversupply expectation in the spot market may be hard to realize. CICC believes that the Brent oil price bottom may have already been lifted to around $70 per barrel, with the annual price center also raised. In their scenario analysis, CICC still considers the baseline that the Hormuz Strait oil trade will not remain interrupted; shipping data shows a slight rebound to 60,000 barrels per day on March 6, and the IEA states that OECD countries have not yet considered releasing their SPR. Last week, the U.S. announced temporary waivers for Indian imports of Russian oil. According to Bloomberg, as of early March, global seaborne crude inventories are about 1.3 billion barrels, with Russian seaborne crude around 140 million barrels; with increased alternative procurement demand in Asia, Russian crude exports by sea have begun to recover since February.

Under the baseline, CICC expects the Strait of Hormuz trade disruption to end within two weeks, raising the Brent price forecast for Q1-Q4 2024 to $75, $80, $75, and $72.5 per barrel. In a risk scenario, if the disruption persists into Q2 2026, CICC suggests the Brent price could rise above $120 per barrel, potentially causing significant depletion of crude inventories and forcing OECD countries to release SPR; looking further ahead, excessive price increases may suppress demand and lead to market rebalancing, with Brent prices in the second half of the year possibly falling back to $70-$80 per barrel.

Risk Warning

Unexpected geopolitical developments, macroeconomic growth exceeding expectations, and industry policy adjustments beyond expectations.