$200 Oil No Longer Seems Far-Fetched as Middle East Supply Crumbles

• Oil exports and production in the Middle East have plunged, wiping out more than 7–10 million barrels per day from global supply and triggering a significant physical shortage.
• With supply tight and storage capacity limited, prices could climb to $150–$200+ per barrel, and some analysts caution that prolonged disruptions may drive even sharper spikes.
• Even if the conflict subsides, a recovery is likely to be gradual, and any short-term relief won’t fully make up for the deficit, keeping prices elevated.

Just a month ago, any analyst predicting oil could surge to $200 per barrel would have been dismissed outright. Now, that scenario is increasingly being taken seriously—and for good reason.

Middle Eastern oil and fuel exports, which averaged over 25 million barrels per day in February, have plunged by nearly two-thirds by mid-March, according to data from Kpler and Vortexa. Even more concerning is production: across the region, output is being slashed, with wells not easily or quickly restarted. Limited storage is forcing producers to cut supply, and in some cases, oil is being stored offshore rather than delivered to buyers. Altogether, roughly a fifth of global oil supply is severely disrupted, and even if the conflict ended immediately, recovery would take time.

Production cuts are substantial: Iraq alone has reduced output by around 2.9 million barrels per day, while Saudi Arabia has cut between 2 and 2.5 million. The UAE and Kuwait have also made significant reductions, bringing total lost supply to over 7 million barrels daily. This stands in stark contrast to earlier expectations from the International Energy Agency, which had forecast a surplus this year. Instead, as much as 10 million barrels per day may now be offline.

With physical supply constrained, the market has little ability to respond to demand, pushing prices sharply higher and making them slow to fall even if conditions improve. Some analysts now see $150 oil as a baseline, with $200 or higher no longer out of the question. Others warn that prices could spike even further in a sustained shortage, as commodity markets tend to move dramatically under such conditions.

That said, not all forecasts are bullish. Some expect prices to retreat below $100 for Brent and $90 for WTI if the conflict ends quickly—though there are few signs of that happening. Even in a best-case scenario, restarting production would take months, meaning prices would likely remain elevated due to lingering supply constraints.

Temporary relief has come from increased availability of sanctioned Russian oil, with nearly 200 million barrels currently in transit globally. However, this is unlikely to fully offset the shortfall. Meanwhile, measures like China restricting fuel exports and cutting refining rates, or the potential restart of limited pipeline flows from Iraq and Kurdistan, are unlikely to significantly ease the imbalance.

What once seemed unthinkable—a $200 oil price—is now within the realm of possibility. Still, given the economic strain such levels would impose worldwide, there is hope that de-escalation efforts may eventually prevent the most extreme outcomes.

Sources: Irina Slav