Key facts
- Oil prices are nearing $100 per barrel due to ongoing supply disruptions.
- The market faces an effective deficit of approximately 5 million bpd.
- Commercial inventories and OPEC spare capacity have been significantly drawn down.
- Restoring oil flows to pre-conflict levels could take months or years.
- Stock markets, including the S&P 500, have rallied and are not pricing in the supply shock risk.
Oil prices are approaching $100 per barrel, driven by a structural supply disruption that has depleted commercial inventories and OPEC spare capacity. The market faces an effective deficit of approximately 5 million barrels per day (bpd), with restoration of supply expected to take months or even years. Despite this, stock markets, including the S&P 500, have continued to rally, reaching record highs and showing no signs of pricing in the geopolitical risk or the persistent supply shock. This disconnect leaves the market "dangerously exposed to a severe decline," as buffers are nearly gone and replacement barrels face significant delays and increased costs, such as war-risk insurance jumping to 3-8% of a vessel's value. Even if a ceasefire were to occur, restoring pre-conflict oil flows is projected to take at least four months, with full volumes unlikely before mid-2027. Non-OPEC+ supply growth is also expected to be limited.