Brent: Conflict scenarios keep prices elevated – Societe Generale

Societe Generale’s Commodity Compass Analytics (CCA) team, led by Michael Haigh, Ben Hoff and Jeremy Sellem, highlights that Dated Brent at $141/bbl reflects severe physical tightness as Strait of Hormuz flows remain impaired. Their scenario work maps outcomes from controlled escalation to prolonged conflict and chokepoint closures, with Brent prices ranging from around $125/bbl to potentially above $200/bbl and only gradual normalisation of inventories into late 2026.

Oil shock scenarios and price paths

"In this week’s CCA, we examine three new scenarios. The first (A) explores the implications of imposing tolls on vessels transiting the Strait of Hormuz, including the economics of such a charge and its potential ramifications for future conflicts. Spread across approximately 21,900 tanker transits, this implies an average fee of about $520,000 per vessel based on our assumptions, equivalent to roughly $0.26/bbl."

"The second scenario (B) focuses on the conflict itself, assuming it extends through April into May, with controlled escalation followed by a relatively swift resolution. In this scenario, oil prices rise further, and demand destruction accelerates, driven by both higher prices and policy‑led consumption adjustments. As conditions eventually normalise, countries would not only rebuild inventories to pre‑war levels but expand stockpiling beyond that, prioritising supply security over price and providing ongoing price support. Under this scenario, prices average $125/bbl in April."

"In the third scenario (C), rather than a controlled escalation, the conflict intensifies. This could involve U.S. boots on the ground and would likely trigger a broader regional war, drawing Iran’s proxies more directly into the conflict. In this scenario, we assume oil market disruption escalates sharply, potentially involving a short‑term closure of the Bab el‑Mandeb."

"Under these conditions, prices would rise sharply, averaging $150/bbl and potentially exceeding $200/bbl. While demand destruction would accelerate in response to higher prices, precautionary and strategic stockpiling would partially offset this effect, lifting the medium‑term price outlook despite weaker consumption."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)