This article argues that what truly drives oil prices is not just whether the conflict ends, but "when the tipping point will be crossed." In the nearly four-week-long conflict with Iran, the oil market is undergoing a classic "time-based pricing" process. The release of strategic reserves has delayed the impact but cannot eliminate the supply gap; disruptions to tanker transport and delayed production recovery are causing inventory pressure to accumulate into the future. Once the critical mid-April mark is passed, the price mechanism will shift from "buffered volatility" to "gap-driven repricing." More importantly, the game structure itself is changing. The conflict is no longer following an "escalation-to-de-escalation" path, but rather a test of endurance against the market's tipping point. Whoever can withstand the market-driven supply-demand imbalance will hold the upper hand in negotiations. This means that even if the conflict ends in the short term, oil prices are unlikely to return to their previous range. The current supply losses are reshaping the global oil balance for some time to come. In this article, I will break down several possible scenarios. With the Iranian conflict now nearly four weeks in the making, how will this situation affect the oil market? On March 9th, we published an article titled "My Latest Assessment of the Oil and Gas Market Amid the Iranian Conflict," in which we stated the following impacts on oil prices under different scenarios (the "loss in barrels" includes the time required to restore production capacity): Scenario 1: Tanker shipping resumes the following day → Brent crude oil's annual average price will be in the range of $70 to $80 (approximately a loss of 210 million barrels); Scenario 2: Tanker shipping resumes before March 15th → Brent's annual average price will be in the mid-to-high range of $80 (approximately a loss of 290 million barrels); Scenario 3: Tanker shipping resumes before March 22nd → Brent's annual average price will be in the low range of $90 (approximately a loss of 370 million barrels); Scenario 4: Tanker shipping resumes before March 29th → Brent's annual average price will be in the mid-to-high range of $90 (approximately a loss of 450 million barrels). If tanker shipping still cannot return to normal by March 29th, the situation facing the oil market will be unimaginable. The only way out would be a forced contraction in demand, pushing prices to extreme levels. Shortly after the report's release, the International Energy Agency (IEA) announced a coordinated release of a total of 400 million barrels from the global strategic petroleum reserve (SPR). This will alleviate the impact of supply losses to some extent. However, as we pointed out in our subsequent article, "IEA's Coordinated Release of SPR: A Biggest Gift for Bulls," from a trading perspective, traders will not rush to push oil prices higher until this "buffer" is exhausted. The concentrated release of SPR does alleviate short-term supply anxiety, but it is only a temporary solution.The market will remain tense, and oil prices will gradually rise as long as tanker shipping doesn't return to normal. On the other hand, if the situation eases quickly—for example, with an immediate ceasefire or agreement—oil prices will fall rapidly. For instance, if a peace agreement is reached before March 15, global inventories will see a net increase of 110 million barrels (400 million barrels released – 290 million barrels lost). This could push Brent prices back to the mid-$70 range. Conversely, without a peace agreement and with supply disruptions continuing until the end of March, global inventories will see a net decrease of 50 million barrels, and the deficit will widen by approximately 80 million barrels for each week it continues. Therefore, the SPR's role is merely to "buy time" and doesn't solve the core problem. Tanker shipping must return to normal. However, it does prevent a catastrophic price surge in the short term, thus preventing a massive collapse in demand. We have now entered the "March 29 scenario" set at the beginning of the month. Next, we will assess the oil market's direction based on the latest facts. The facts are clear: the total production stoppage in Saudi Arabia, the UAE, Kuwait, Iraq, and Bahrain has reached 10.98 million barrels per day: Iraq -3.6 million barrels per day, Kuwait -2.35 million barrels per day, UAE -1.8 million barrels per day, Saudi Arabia -3.05 million barrels per day, and Bahrain -180,000 barrels per day. Saudi Arabia has fully utilized its east-west pipeline capacity, currently exporting approximately 4 million barrels per day via the Red Sea. The UAE is also using the Habshan-Fujairah pipeline as a detour, and its capacity of approximately 1.8 million barrels per day is also at its limit. Tanker traffic in the Strait of Hormuz remains completely disrupted. In fact, even if the war ends tomorrow, it will take months to restore production and rebuild normal transportation. I will present three possible paths: 1) The war ends this week, and transportation resumes by the end of this week; 2) The war ends in mid-April; 3) The war ends at the end of April. It's important to note that the release of 400 million barrels of SPR (Special Purpose Release) provides the market with more time compared to our initial assessment on March 9th. The following oil price scenarios have taken this change into account: Scenario 1: Ends this week, impact on global inventories -50 million barrels (already factored in the SPR), impact on Brent: short-term decline to a low of $80, with the annual average price at a mid-to-high level of $80. Scenario 2: Ends in mid-April, impact on global inventories -210 million barrels, impact on Brent: short-term decline to a low of $90, with the annual average price at a mid-to-high level of $90. Scenario 3: Ends at the end of April, impact on global inventories -370 million barrels, impact on Brent: short-term surge to the $110 range, with the annual average price at $110–$120. For the oil market, there is a clear "critical point."The current market consensus is that the conflict will end by mid-April, and this expectation is crucial for oil price pricing. Oil prices are a product of "marginal pricing." As long as the market believes that supply is still "barely sufficient," there will be no panic. This is precisely the current state of the oil market—a lack of panic. The Trump administration's policy statements, the easing of sanctions on Iranian and Russian oil, and the release of the Strategic Petroleum Reserve (SPR) have all suppressed oil prices. However, once this critical point is crossed, these factors will become ineffective. Currently, the evaporation effect of global "in-transit crude oil" has not yet truly transmitted to onshore inventories. But we judge that this impact will be fully apparent by mid-April. If the conflict is not resolved by mid-April, the International Energy Agency (IEA) will have to coordinate the release of approximately 400 million barrels of Strategic Petroleum Reserve (SPR) again. Otherwise, oil prices will surge into the "demand destruction" range (above $200). In Energy Aspect's latest weekly report, it estimates that the cumulative supply loss in the market is approximately 930 million barrels. Of this, the cumulative production loss from May to December is approximately 340 million barrels. This assessment is clearly more aggressive than ours. Our inventory sensitivity analysis did not fully consider the reality that countries like Iraq and Kuwait might need 3 to 4 months to restore production capacity. This means that our previous estimates may have been too conservative. For Goldman Sachs, the conclusion is straightforward: the longer the conflict lasts, the longer high oil prices will persist. In the above scenario, Goldman Sachs also gave a hypothesis: what would the market look like if the conflict continued for another 10 weeks? Their judgment is basically consistent with our previous deductions. Essentially, there is a "critical point" in the oil market. Once this line is crossed, there is no turning back. Readers need to be prepared: future oil prices will show a structural increase. Even if the war ends this week, the supply losses that have already occurred will have a substantial impact on the future global oil supply and demand balance. So far, I have avoided making a judgment on "when this conflict will end." On the one hand, I don't want to "set a flag," and on the other hand, it is indeed impossible to predict. But one thing is clear: this conflict is different from previous ones. In the past, the common strategy was "escalate to de-escalate," but now there's almost no sign of that. Retaliatory strikes occurred without warning; Iran's strikes no longer seem to be limited to Israel, but have expanded to the Gulf states. It was this reaction that made me realize from the beginning—this time, things are different.With the conflict nearing its fourth week, I am increasingly worried that with each day of delay, the probability of an agreement decreases significantly. As we analyzed in our article "Time Is Running Out," Iran is very clear about the logic of the oil market. It only needs to wait for the market to reach that "critical point" to extract maximum concessions from the US in negotiations. From a tactical perspective, reaching an agreement at this point offers no advantage. The Strait of Hormuz card has already been played and is unlikely to be used again. For the Gulf states, if the current Iranian regime is not overthrown, this "strangulation" situation will continue to occur. Even with some form of "transit fee" mechanism, this uncertainty remains unacceptable. Therefore, logically, the initiative lies not with the US, but with Iran. In this situation, Iran has a greater incentive to push the situation to the "critical point" of the oil market to test the US's resilience. All it needs to do is "hold on" for another three weeks until cracks appear in the market. However, it is important to emphasize that I am not a geopolitical expert and do not have complete confidence in such judgments. What I can offer is only an assessment of the current situation based on fundamental analysis. [BlockBeats]
Oil’s Critical Point & Crypto Market Implications: Mid-April Showdown
The oil market stands at a precipice, with mid-April emerging as the critical juncture that could redefine global energy markets and profoundly impact the crypto ecosystem. The ongoing conflict with Iran has already disrupted approximately 10.98 million barrels per day of production from key Middle Eastern producers, creating a supply deficit that strategic petroleum releases (400 million barrels) have merely papered over rather than resolved. As we approach this inflection point, crypto investors must recognize that oil prices are no longer just a traditional market concern—they represent a systemic risk that could reshape the entire risk landscape.
The Three-Act Drama of Oil Prices
The market is currently pricing in three distinct scenarios with vastly different implications for risk assets:
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Resolution This Week: Brent crude stabilizing around $80 would represent a best-case scenario, offering temporary relief to inflation-sensitive assets. This outcome would likely trigger a modest rally in risk assets, including crypto, as immediate supply concerns ease. However, the cumulative supply losses (already estimated at 930 million barrels according to Energy Aspect) would still exert upward pressure on prices throughout 2024.
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Mid-April Resolution: Brent crude in the $90 range represents the market’s current consensus expectation. This scenario would maintain elevated inflationary pressures, constraining central bank flexibility and likely keeping crypto markets in a consolidation phase. Bitcoin might find support near its current levels but would struggle to break out significantly without more accommodative macro conditions.
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End-of-Aprile Escalation: Brent crude surging to $110-120 would trigger systemic consequences. This “demand destruction” territory would force central banks into an impossible choice—either tolerate runaway inflation or risk cratering economic growth. Either outcome would be devastating for risk assets, with crypto likely facing significant downside pressure as liquidity evaporates and risk aversion intensifies.
Crypto Market Specific Implications
The oil market’s critical point represents more than just an energy crisis—it’s a stress test for the entire financial system that will have asymmetric effects across the crypto ecosystem:
Bitcoin’s Inflation Hedge Narrative: The longer oil prices remain elevated, the stronger Bitcoin’s case as an inflation-resistant asset becomes. However, if prices surge into the $110-120 range, the resulting economic damage could undermine this narrative, as investors flee to cash rather than alternative assets.
Energy-Intensive Protocols: PoW cryptocurrencies like Bitcoin and Litecoin face heightened scrutiny in a high-energy-price environment. We could see renewed regulatory pressure on energy-intensive consensus mechanisms, particularly in jurisdictions experiencing direct economic pain from oil price shocks.
DeFi and Traditional Finance Interconnectedness: Crypto markets’ increasing correlation with traditional assets means that oil-induced market stress will inevitably spill over into DeFi. Protocols with significant leverage exposure or concentrated liquidity pools could face severe stress during flight-to-quality episodes.
Infrastructure Opportunities: Paradoxically, the energy crisis could accelerate certain crypto narratives. Projects focused on energy-efficient consensus mechanisms, decentralized physical infrastructure networks (DePIN), and carbon credit markets could see increased attention and capital inflows as traditional energy infrastructure proves vulnerable.
Strategic Considerations for Crypto Investors
Experienced crypto investors should position themselves with several key considerations in mind:
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Diversify Away from Pure Beta Exposure: As traditional market correlations strengthen, portfolios should emphasize projects with unique value propositions beyond simple market exposure.
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Monitor Energy Market Signals: Develop a framework for tracking oil market developments, particularly focusing on Strait of Hormuz traffic data and production recovery timelines from Gulf states.
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Prepare for Extreme Scenarios: Stress-test portfolios against potential oil-driven market dislocations, including severe liquidity crunches and heightened regulatory scrutiny.
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Focus on Fundamental Utility: In an inflationary environment, projects solving real-world problems—particularly in energy, supply chain, and financial infrastructure—will likely outperform purely speculative assets.
The mid-April oil market inflection point represents a critical juncture that could either validate crypto’s emerging role in the global financial system or subject it to severe stress tests. Investors who understand these interconnections and position accordingly will be best positioned to navigate the turbulence ahead.
The Geopolitical Wildcard
Perhaps most concerning is the apparent departure from traditional conflict escalation-de-escalation patterns. Iran’s apparent strategy of pushing the market to its critical point before negotiations suggests a game of endurance where the side that can withstand the market imbalance holds the upper hand. This unpredictable dynamic increases the likelihood of a worst-case scenario, as neither side may have an incentive to back down before the market reaches its breaking point.
For crypto investors, this uncertainty means that risk management should be paramount. The potential for disorderly markets, liquidity crises, and regulatory responses to energy-driven inflation creates an environment where preservation of capital may temporarily outweigh growth opportunities.