A permanent risk premium will be priced into commodities going forward because the current crisis has unequivocally demonstrated Iran's power to close the Strait of Hormuz.
The world's spare oil production capacity is critically dependent on the Strait of Hormuz remaining open, as it is concentrated in Saudi Arabia, the UAE, and Kuwait, and existing bypass infrastructure is insufficient to reroute total output.
The current crisis is causing more significant oil demand destruction than previously anticipated and is creating severe disruptions in non-fuel commodity supply chains, particularly for chemical feedstocks like naphtha and natural gas for fertilizers.
Nations are actively shifting their energy policies toward security and self-sufficiency, as seen in China's investments after its 2021 power crisis and the potential for the U.S. to delay coal plant retirements to ensure electricity supply.
Gulf countries are managing the crisis more effectively than expected by fully utilizing strategic pipelines and demonstrating higher-than-anticipated inventory capacity, which minimizes the need to shut in production.
Prior to 2021
Kaufmannani notes that Saudi Arabia's east-west pipeline was underutilized before the current crisis, indicating a different strategic posture.
2021
An electricity crisis in China prompted a strategic shift, leading the country to increase investment in both domestic coal production and renewable generation to bolster energy security.
Start of Current Crisis
Kaufmannani identifies immediate impacts, including the curtailment of natural gas supplies to fertilizer sectors in India, Pakistan, and Bangladesh, and a major disruption to the supply of naphtha.
During Current Crisis
Her analysis indicates visible global oil inventories have drawn down significantly, while oil demand destruction is proving higher than expected. Concurrently, Gulf countries have curtailed less production than anticipated due to strategic use of pipelines and storage.
Current Forecast (Baseline)
Kaufmannani's firm's year-end forecast for Brent crude is around $80 per barrel, which aligns with current trading levels.
Future Forecast (Adverse Scenario)
She presents a revised adverse scenario where a delayed reopening of the Strait of Hormuz to mid-May would push Brent crude prices into the $90 to $100 per barrel range.
▶Geopolitical Chokepoints and Strategic InfrastructureApr 2026
Kaufmannani's analysis centers on the vulnerability of the global energy supply to chokepoints, specifically the Strait of Hormuz. She details how nations like Saudi Arabia and the UAE use bypass pipelines and storage capacity to mitigate this risk, while also emphasizing that these measures are insufficient to fully replace the Strait's throughput.
Investors should price in higher and more persistent volatility for energy assets, as Kaufmannani's analysis suggests that existing strategic infrastructure provides only a partial buffer against major geopolitical disruptions.
▶Fundamental Repricing of Commodity RiskApr 2026
A core theme is that the current crisis has permanently altered the market's perception of risk. Kaufmannani argues that Iran's demonstrated ability to disrupt the Strait of Hormuz will result in a 'permanent risk premium' being priced into commodities, moving beyond short-term price spikes.
Analysts should adjust their long-term commodity price models to include a structural geopolitical risk premium, as the market is unlikely to return to its previous baseline assumptions about supply security.
▶Cascading Impacts on Global Supply ChainsApr 2026
Kaufmannani extends her analysis beyond crude oil to the downstream effects on industrial supply chains. She highlights the disruption in naphtha (a key chemical feedstock), the curtailment of natural gas for fertilizer production in South Asia, and the fact that 95% of manufactured goods rely on chemical inputs.
This focus on secondary effects indicates that industrial and agricultural sectors are highly exposed to energy market disruptions, creating non-obvious risks for portfolios concentrated in those areas.
▶National Energy Security Policy ShiftsApr 2026
She observes that nations are actively revising their energy policies to prioritize security over other goals. This is evidenced by China's increased investment in domestic coal and renewables post-2021, U.S. tariffs on metals to encourage domestic production, and the suggestion that the U.S. may delay retiring coal plants.
The global trend towards prioritizing energy security could create new investment opportunities in domestic energy production, including traditional fossil fuels and renewables, as nations seek to reduce reliance on vulnerable supply chains.