- Brent crude surged past $103/barrel Monday — an 8%+ jump — as U.S.-Iran peace talks collapsed in Islamabad and the U.S. Navy began implementing its Hormuz blockade, applying to all vessels entering or departing Iranian ports from 10 a.m. New York time
- Onyx Capital Group’s Jorge Montepeque told Bloomberg TV the $103 price is “not reflective at all” of what a real interdiction implies, saying the justified price is “$140, $150” — because a full Hormuz blockade would strip up to 12 million barrels per day from global supply
- The relatively calm Asian session price move reflects trader disbelief — Montepeque said traders found it “too crazy” for both sides of the strait to be blocked — but he warned markets are dangerously underestimating what happens if the U.S. follows through
- If Trump dials back some actions, Montepeque estimates oil could settle around $100/barrel for the rest of the year — but called the current strategy “demented,” saying the U.S. is “so focused on Iran that they are losing sight of what they are causing to the world”
What Happened?
Oil markets lurched higher Monday morning after U.S.-Iran peace talks in Islamabad collapsed over the weekend and President Trump ordered the U.S. Navy to begin blockading the Strait of Hormuz — interdicting all vessels entering or departing Iranian ports. Brent crude surged past $103 per barrel, a gain of more than 8%, as the blockade began at 10 a.m. New York time. Jorge Montepeque, managing director at Onyx Capital Group and a veteran oil market executive, told Bloomberg Television the price move badly underestimates the stakes. “The number we saw this morning — $103; 8% increase — is not reflective at all of what could happen if the U.S. really decides to go with this interdiction,” he said. “It should be $140, $150.”
Why It Matters?
The gap between the current market price and what Montepeque argues is the fair value reflects a classic wartime uncertainty discount: traders are pricing in some probability that the blockade will be short-lived, that Iran will back down, or that the U.S. will pull back before fully implementing interdiction. But if the blockade holds, the math is stark. A full Hormuz interdiction would block as much as 12 million barrels per day of Gulf oil production from reaching global markets — roughly 12% of global supply — on top of the roughly 13 million barrels per day already disrupted since the war began in late February. The combined supply loss, at that scale, would dwarf any previous oil shock in history, including the 1973 Arab embargo and the 1979 Iranian Revolution. Asian economies — already rationing fuel and running short of jet fuel — would face the most acute damage.
What’s Next?
The blockade’s effectiveness will depend on whether the U.S. can deter shadow-fleet tankers and Iranian fast-attack boats simultaneously, and whether a meaningful coalition of nations joins the interdiction effort. Trump has claimed “numerous countries” will help, but the coalition’s composition remains unclear. Montepeque’s base case — roughly $100/barrel for the rest of the year if Trump dials back some actions — implies markets expect some de-escalation. But he was explicit about the tail risk: a fully enforced blockade, met with Iranian retaliation against Gulf pipelines or Houthi closure of Bab al-Mandeb, would produce an oil shock that current prices nowhere near reflect.
Source: Bloomberg
