Get ready for $200 a barrel oil prices if Hormuz stays closed

• If that happens, oil's recent rise — briefly nearing $120 a barrel — could look modest.

Driving the news: U.S. gasoline prices have jumped 35% since the war began last month, topping $4 a gallon earlier this week.

• Countries more dependent on Middle East oil are already seeing worse, including fuel shortages.

What they're saying: Eurasia Group, a political risk consulting firm, puts 55% odds on the war lasting through May. If Iran damages oil infrastructure, prices could spike above $150 a barrel, it said Tuesday.

• Analysts at Macquarie, a financial services company, last week said oil could reach $200 if the war drags into June, assigning a 40% probability.

"There is no policy option to prevent oil prices from marching up toward $200 a barrel if the Strait of Hormuz remains closed," said Jason Bordoff, founding executive director of Columbia University's Center on Global Energy Policy.

• "It's too large of an amount of supply to the global market."

Daniel Yergin, who hosted the world's premier energy conference in Houston last week, declined to give a specific forecast — but noted: "You do hear $200."

Catch up quick: Roughly 20% of global oil and liquefied natural gas flows through the narrow waterway of the Strait of Hormuz.

State of play: Prices have actually been somewhat contained because of short-term buffers — oil already in transit and releases from strategic reserves. But those cushions are fading.

• "Ships that escaped the Strait of Hormuz before [the war] began have reached port," former Secretary of State John Kerry said last week at the Houston conference. "They're empty now."

Flashback: Oil's historic peak was just under $150 a barrel in 2008, in nominal terms, before the Great Recession. That's roughly $230 in today's dollars.

• Brent crude reached $139 in March 2022 after Russia invaded Ukraine, helping push U.S. gasoline to a record $5.02 a gallon.

How it works: The focus on $200 a barrel "is not an accident," said Kevin Book, managing director of research firm ClearView Energy Partners. It echoes the 2008 record.

• Back then, "economic calamity" ultimately forced demand lower and rebalanced the market, he said.

• If reopening the Strait doesn't rebalance supply and demand, or if the Strait doesn't reopen for a long time, "then economic calamity is likely to follow," Book said.

Zoom out: Dozens of countries — many lower-income — are already taking emergency measures, from closing schools to mandating remote work, according to the International Energy Agency.

• Even wealthier countries are feeling acute strain: The U.K. is facing jet fuel shortages.

What's next: "In the next several weeks, you're going to see the physical reality of oil shortfalls catching up to market trading activity," Bordoff said. "And that's going to cause oil prices to have to rise fast enough to make people use less oil."

What we're watching: Oil spikes don't usually trigger lasting shifts away from fossil fuels.

• But Bordoff says this crisis could resemble the 1970s, which did spur major energy shifts, including a nuclear boom and a move away from oil in power generation in the U.S.
• The price increases in that crisis were so painful that anything on that scale this time might convince more people to steer away from fossil fuels, Bordoff said.

The bottom line: "When it comes to energy crises, our memories are short," Bordoff said. "I think this has more potential than anything since the 1970s to create traumatic experiences that lead to lasting change."