Forecast on the timing of the Middle East conflict and Hormuz blockade ends

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented to the Oil and Gas Information Agency (Tyumen Region) on the prospects for unblocking the Strait of Hormuz and adapting world trade to its closure.

"The global commodity market, including oil, petroleum products and LNG, is a system with appropriate and well-developed internal balancing mechanisms. Not only in theory, but also in practice, it is able to adapt to any development of events and is doing it very effectively so far," Alexey Belogoryev said. - Not a single commodity market affected by the conflict, and there are dozens of them, has implemented the alarmist scenarios that stirred minds in March."

According to him, demand is now being forced to adjust to supply, while alternative, substitute production in other regions, including substitutes such as coal instead of LNG, is slowly starting to grow.

"The release of commercial and strategic reserves remains a significant balancing factor, especially for the oil and petroleum products markets. Therefore, even if all this drags on until the end of summer, nothing catastrophic will happen, despite the peak period of demand, the expert believes. – By autumn, again in theory, a critical mass of risks may accumulate, which will lead to a qualitative deterioration of the situation and an additional increase in prices."

In his opinion, Brent oil prices will gain a foothold above $120 per barrel by the beginning of autumn, but they are unlikely to be $200 or even $150. At the same time, the accumulated inflationary effect will be more noticeable, including in the food markets, which are under the double blow of a shortage of fertilizers and rising fuel prices.

"But even the scenario of partial (and it's still not complete) blocking of the Strait of Hormuz by the end of the year doesn't look economically deadly anymore. This is, of course, a great stress for the global economy and a direct path to a noticeable recession and accelerated inflation, but not the horror-horror that seemed quite recently. So far, most forecasts, as far as I can see, are based on the completion of the blockade before September," Alexey Belogoryev concluded.