Strait of Hormuz reopening odds plunge to 47% as oil risks mount

The probability that the Strait of Hormuz returns to normal traffic within the next 12 months collapsed to 47% on Kalshi from nearly 70% two days earlier, as traders repriced the likelihood of a prolonged disruption to the world's most critical oil chokepoint.

"The market is finally accepting that this is not a short-term disruption — the overlapping risks across Hormuz, Bab el-Mandeb and the Black Sea are creating a supply shock that has no obvious off-ramp," said Tony Sycamore, market analyst at IG.

Brent crude settled above $100 a barrel on Thursday for the first time since May, closing at $100.69 before slipping to $99.97 on Friday. The benchmark still posted a 13.5% weekly gain, its largest in months, while West Texas Intermediate rose 10.9% to $91.49. The odds of the Strait reopening at any point in 2026 now stand below 40%, while chances of a return to normal before April 2027 are at 48%, according to Kalshi data.

The Strait of Hormuz handles about 21% of global oil trade, and its effective closure — compounded by Houthi attacks on tankers in the Red Sea and a separate supply outage from Kazakhstan's Caspian Pipeline Consortium terminal — has tightened prompt supply faster than most forecasters anticipated. Kazakhstan's oil output fell to roughly 1.63 million barrels per day from a July average of 2.07 million, with production at the Chevron-led Tengiz field more than halved to about 406,000 barrels per day after suspected drone attacks forced the CPC terminal to halt loadings.

The supply shock is metastasizing across multiple chokepoints

The Red Sea attacks have put Saudi Arabia's main alternative export route at risk. The kingdom has relied on its East-West pipeline to bypass Hormuz, moving crude to Red Sea ports for onward shipment. But Houthi forces said they attacked two tankers carrying Saudi crude this week, threatening that corridor as well. Two Chinese supertankers carrying 4 million barrels of Saudi crude successfully exited through the Bab el-Mandeb Strait on Thursday, but isolated crossings have not reassured shipowners, who face rising insurance premiums and the prospect of longer voyages around southern Africa.

Mizuho energy-futures director Bob Yawger said crude was now within reach of the four-year high of $126.42 as available supplies shrink across two major chokepoints simultaneously. Goldman Sachs retained an $80 fourth-quarter base case but warned Brent could exceed $120 if Hormuz disruption persists and risks spread across Bab el-Mandeb and the Suez route.

Inflation risks are compounding the oil shock

The prolonged disruption is feeding into broader inflation expectations. Ten-year Treasury yields have risen 6 basis points since July 14 as investors shift focus from a softer-than-expected June CPI — which printed core inflation at 2.6% year-over-year — to the potential deterioration in supply chains and energy production. Core personal consumption expenditures, the Fed's preferred inflation gauge, is expected at 3.4% when released Thursday, having crept higher through 2026 after ranging between 2.6% and 3.0% in 2024 and 2025.

The last time a comparable oil supply shock unfolded — during the 2019 attacks on Saudi Aramco's Abqaiq and Khurais facilities — Brent spiked 15% in a single session but reversed within weeks as spare capacity was deployed. This time, spare capacity is thinner, strategic petroleum reserves are near multi-decade lows after repeated releases, and the disruption spans three separate chokepoints simultaneously. The Kalshi probability shift suggests traders see no equivalent circuit-breaker on the horizon.

This article is for informational purposes only and does not constitute investment advice.