Although oil market volatility remains elevated, investors largely shrugged off further attacks on shipping in the Strait of Hormuz last week, focusing instead on strong US inventories data, and fears of a global economic slowdown. Both Brent and WTI prices ended the week a little lower. Our own scenario analysis suggests that, were Iran to impose an effective blockade on the Strait of Hormuz, the initial disruption to global oil supply might be around twice the size of that seen during either of the two oil crises of the 1970s. The muted response of oil prices last week suggests either that investors regard a meaningful escalation as unlikely, or that the potential for the US to increase its production of shale oil means that the impact of Middle East tensions on global oil prices may be smaller than it once was.
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