Q2: What Price Impact Will This Supply Reduction Have?
Executive Summary
Brent crude has already spiked to $103/b in March 2026 and is projected to peak at $115/b in Q2 2026 (EIA). However, institutional forecasts diverge sharply on the ceiling:
Evidence Section
Dallas Fed WTI Scenarios (detailed)
| Scenario | Global GDP Q2 Impact | Q4/Q4 GDP vs Baseline | Peak WTI |
|---|---|---|---|
| 1-quarter closure | −2.9% annualized | −0.2% | $98/b |
| 2-quarter closure | −2.9% annualized | −0.3% | $115/b |
| 3-quarter closure | −2.9% annualized | −1.3% | $132/b |
Note: Q2 impact is identical across scenarios because the shock materializes identically in Q2. The divergence emerges in Q3–Q4 as recovery paths diverge. (Dallas Fed)
Historical Oil Supply Elasticity (Federal Reserve IFDP + Quant Economics)
Research consistently finds:
- Oil supply elasticity near zero at horizons < 6 months
- Price response (demand destruction) is the primary equilibrating variable
- Distillate tightness especially acute — diesel/kerosene/jet markets are structurally tighter than gasoline
- Price elasticity of crude demand: highly negative short-run; more elastic over 2–4 year capital cycling
UNCTAD Financial Channel
Rising geopolitical risk → capital outflows from EM → currency depreciation → import purchasing power loss → amplified fuel price inflation beyond crude spot moves. (UNCTAD Rapid Assessment #2)
Sources Used
- [EIA April 2026 STEO](https://www.eia.gov/pressroom/releases/press586.php) — Official US government Brent/ gasoline/diesel forecasts
- [Dallas Fed: Hormuz Closure Economic Impact](https://www.dallasfed.org/research/economics/2026/0320) — WTI scenarios, GDP paths
- [Dallas Fed WP2027 Supply Elasticity](https://www.dallasfed.org/research/papers/) — Near-zero oil supply elasticity
- [Federal Reserve IFDP Oil Price Elasticities](https://www.federalreserve.gov/) — EM shock channels
- [Quant Economics Supply/Demand/Oil Prices](https://quant-economics.net/) — Theoretical framework for near-zero elasticity
- [UNCTAD Rapid Assessment #2](https://unctad.org/news/hormuz-disruption-deepens-global-economic-strain-across-trade-prices-and-finance) — Trade/demand destruction evidence
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Dallas-Fed-Hormuz-Closure · EIA-STEO-April-2026 · Nature-Sci-Reports-Oil-Supply-Disruption