Strait of Hormuz Oil Supply Shock Peaks: WTI Reaches $113/bbl; Krugman Warns of $150–200 Scenario

As the tariff crash unfolded on April 4, oil markets reached their peak stress level from the overlapping Iran conflict. WTI crude traded around $110–113.60/barrel and Brent crude around $108–110.60/barrel — representing a roughly 70% increase from the February 2026 average of $64.51 and more than a 10% premium over the April 1 ceasefire-signal retreat to $98.79. The Strait of Hormuz, through which approximately 20% of the world's oil supply passes, remained effectively disrupted following Iranian attacks on oil tankers earlier in March. Economists warned that the combined shock of oil supply disruption and tariff-driven trade collapse constituted a classic stagflationary supply-side squeeze: rising energy costs pushing inflation higher while trade barriers and recession fears suppressed demand. Nobel laureate economist Paul Krugman warned in published commentary that a $150–200/barrel oil scenario was 'not impossible' if the Strait remained closed through summer. The oil price spike was feeding directly into gasoline prices and through fuel surcharges into freight, manufacturing, and food costs — complicating the Federal Reserve's path toward rate normalization.