Oil prices are notoriously difficult to forecast. The market has a long history of humbling anyone who speaks with too much certainty. There are just too many complex variables involved.
At the end of 2025, the prevailing narrative was that a surplus of oil was in store for 2026. Several major banks and forecasting agencies expected global supply to exceed demand by multiple millions of barrels per day. Some projections—including those from JPMorgan Chase—anticipated Brent crude drifting into the $60 range by mid-2026.
How quickly things change.
Following a week of escalating conflict in the Middle East and a functional shutdown of commercial traffic through the Strait of Hormuz, West Texas Intermediate crude oil has soared past $110 per barrel as traders price in rising geopolitical risk. That is its highest level since the 2022 price shock following Russia’s invasion of Ukraine. But that move may only represent the early stages of a potential energy shock if tensions escalate further.
While that price remains far below the record levels seen in 2008, the dynamics today are different. Instead of debating whether a disruption might occur, markets are reacting to one already unfolding.
The question many readers now ask is simple: How high could oil prices go?
The honest answer is that no one knows for certain. But we can evaluate the possibilities by looking at three physical constraints that ultimately govern oil markets: spare capacity, demand elasticity, and the limits of policy intervention.
The first constraint is the global supply buffer.
At the end of 2025, the world had roughly 3 to 4 million barrels per day of effective spare production capacity, almost entirely held by Saudi Arabia and the United Arab Emirates.
Under normal conditions, that cushion helps stabilize prices during temporary disruptions.
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But the scale of the Strait of Hormuz puts that buffer into perspective. Roughly 20 million barrels per day—nearly one-fifth of global oil consumption—moves through that narrow waterway.
Even if every barrel of spare capacity were brought online immediately, it would offset only a fraction of the volume currently at risk.
In other words, spare capacity can help smooth smaller disruptions. It cannot fully compensate for a systemic chokepoint affecting such a large share of global supply.
Sometimes when people ask me how high oil prices could go, I ask a different question: How expensive would gasoline have to become before you start driving less?
