Brent crude at $112/barrel is not a number that exists in isolation. It is the output of a specific combination of supply constraints, geopolitical risk premiums, and demand that has not softened as much as central banks assumed it would. The WTM Energy Security Index is currently at its highest reading since the February 2022 Ukraine invasion. Understanding where oil goes from here requires mapping three distinct scenarios — not guessing which one is right, but understanding what signals to watch for each.
What Is Driving Oil to $112
Three forces are acting simultaneously, which is why the price is where it is. First, Iranian export disruption: Iran was producing approximately 3.2 million barrels per day before the war. Even partial disruption of that supply — through damaged infrastructure, insurance withdrawal, or sanctions enforcement — removes a meaningful amount from global markets. Second, the risk premium: traders are pricing in the possibility of Hormuz disruption, which would affect not just Iran but Saudi Arabia, UAE, Kuwait, and Iraq — 21 million barrels per day of global supply. Third, OPEC+ has not moved to increase production. The cartel is not unhappy with $112 oil.
Scenario 1: Managed Escalation — Oil $100–120
The most likely scenario based on current WTM signal patterns. The war continues but Hormuz remains open. Iran's export capacity is degraded but not eliminated. Global producers outside the Gulf — US shale, Brazil, Canada — increase output gradually over 3–6 months to partially offset the supply gap. Oil oscillates between $100 and $120 depending on weekly incident reports.
In this scenario, the WTM Energy Security Index stays elevated (75–90) but does not break toward 100. CPI inflation in oil-importing countries runs 1–2% higher than it would otherwise, but does not spiral. Central banks hold rates higher for longer. Growth slows but does not collapse. The gold-oil ratio stays compressed — gold stays elevated but oil does not fall away enough to push the ratio back to normal ranges.
Scenario 2: Hormuz Disruption — Oil $140–180
The tail-risk scenario. If military operations directly threaten Hormuz Strait shipping — whether through Iranian mines, missile attacks on tankers, or a deliberate closure threat — the oil market response would be immediate and severe. The IEA Strategic Petroleum Reserve would be activated, but SPR releases historically dampen spikes by $10–20 rather than preventing them entirely.
At $150+ oil, the inflation implications are severe: every major economy importing oil — Japan, India, Europe, South Korea, China — would see a 2–4% direct CPI impulse within 90 days. Central banks would face the worst of all scenarios: inflation too high to cut, growth too weak to hike. The WTM score would push toward 99. The gold-oil ratio would compress to historic lows as oil outpaces even gold's safe-haven bid.
Scenario 3: Ceasefire / De-escalation — Oil $75–90
The scenario the market is not pricing. If a ceasefire agreement is reached — brokered by Turkey, Qatar, or under UN auspices — oil would fall sharply as the risk premium is unwound. The WTM score would drop 15–25 points within days as event memory begins decaying. Iranian export capacity would recover over 3–6 months as infrastructure is repaired and insurance markets reopen.
This scenario would be the most significant deflationary impulse available to global central banks. Oil at $80 combined with a WTM score dropping from 95 to 65 would allow rate cuts, currency stability in EM markets, and a partial reversal of the commodity-driven inflation of 2026. It would not immediately reverse all the damage — supply chains take time to re-optimise — but the direction would shift clearly.
What the WTM Is Watching
The key indicator for which scenario is playing out is the WTM Energy Security volatility sub-score. High oil prices with low volatility means the market has accepted the new price level as stable — Scenario 1. High oil prices with rising volatility means the market is pricing in further disruption — the path toward Scenario 2. A rapid fall in the Energy Security Index score — particularly if the oil sub-score drops while the gas sub-score holds — would signal early signs of Scenario 3: ceasefire-driven oil unwinding while gas infrastructure takes longer to recover.
For context: every $10 increase in oil adds approximately 0.3% to headline CPI in major importing economies within 3 months. At $112 versus a pre-war baseline of $78, that is already a 1–1.2% structural addition to inflation that was not in any central bank forecast model at the start of 2026.