Oil markets are in turmoil after weeks of military conflict in the Middle East triggered what energy officials are calling the largest supply disruption in the history of the global oil market.
Benchmark Brent crude has surged by around $20 a barrel since hostilities broke out on 28 February, trading within striking distance of $120 a barrel at its peak.
Brent has now risen roughly 80% since the conflict began, driven largely by the near-total shutdown of tanker traffic through the Strait of Hormuz, the chokepoint that handles about 20% of global oil and gas flows.
As of Sunday night, Brent was hovering around the $111 mark, up roughly 55% from levels just before U.S. strikes on Iran began.
President Trump issued a fresh ultimatum on Saturday, giving Iran 48 hours to reopen the Strait or face strikes on its power plants.
The Hormuz Chokepoint
The crisis has led to a near halt in tanker movements through the Strait of Hormuz.
With nearly 20 million barrels per day of crude and product exports currently disrupted, and limited alternative routes available, producers and consumers across the world are feeling the strain.
The oil production of Kuwait, Iraq, Saudi Arabia, and the United Arab Emirates collectively dropped by a reported 6.7 million barrels per day by 10 March, and by at least 10 million barrels per day as of 12 March.
Neil Atkinson, former head of oil at the International Energy Agency (IEA), said the effective closure of the Strait is something energy markets had never seen before.
Unless something changes very soon, “we are in a potentially game-changing and unprecedented energy crisis,” he told CNBC.
IEA Issues Emergency Response
IEA Executive Director Fatih Birol described the war as creating “a major energy crisis, including the largest supply disruption in the history of the global oil market.”
The IEA announced the largest emergency reserve release in its history at 400 million barrels and the U.S. committed to tapping 172 million barrels from the Strategic Petroleum Reserve over 120 days. So far, the releases have done little to contain prices.
The IEA has also outlined a set of demand-reduction measures for governments and households.
These include working from home, reducing highway speed limits, shifting to public transport, and increasing car sharing steps aimed at cutting oil consumption while supply remains constrained.
Asia Faces the Sharpest Squeeze
Dubai crude, the pricing benchmark for Asian buyers hit an all-time high above $150 a barrel last week.
In 2024, an estimated 84% of crude oil and condensate shipments through the Strait were destined for Asian markets, with China receiving a third of its oil via the waterway.
Rory Johnston, a commodities analyst specialising in oil, warned that the longer the Strait stays closed, the more Asia’s supply shortage becomes everyone’s problem.
Asian refiners are now sourcing barrels from further afield, a sign that regional scarcity could soon turn global.
Inflation and Economic Risks Mount
Analysts forecast that prices could add 0.8% to global inflation if disruptions persist.
Rising oil prices reduce the purchasing power of consumers, weigh on economic growth, and push up inflation, economists warn.
Analyst John Kilduff warned that if the Strait remains closed beyond two weeks, “you will see shortages in places like India, Japan, and South Korea.
They will start to rein in industrial production. They’re going to have to conserve to keep the lights on, literally.”
Could Prices Go Higher?
ExxonMobil’s chief economist Tyler Goodspeed said there are “many more scenarios, and more probable scenarios, in which the strait remains effectively closed harder for longer than there are scenarios in which normal traffic resumes.”
He added that Brent could climb to $135 per barrel if the situation worsens.
On the other hand, Kilduff noted there is “less reason to be worried about the U.S. right now,” pointing to strong domestic production and existing floating storage as near-term buffers.
On Thursday, oil prices briefly pulled back after Israeli Prime Minister Benjamin Netanyahu said Israel was helping the U.S. reopen the Strait and that the war “may end sooner than people think.”
Oil markets are in turmoil after weeks of military conflict in the Middle East triggered what energy officials are calling the largest supply disruption in the history of the global oil market.
Benchmark Brent crude has surged by around $20 a barrel since hostilities broke out on 28 February, trading within striking distance of $120 a barrel at its peak.
Brent has now risen roughly 80% since the conflict began, driven largely by the near-total shutdown of tanker traffic through the Strait of Hormuz, the chokepoint that handles about 20% of global oil and gas flows.
As of Sunday night, Brent was hovering around the $111 mark, up roughly 55% from levels just before U.S. strikes on Iran began.
President Trump issued a fresh ultimatum on Saturday, giving Iran 48 hours to reopen the Strait or face strikes on its power plants.
The Hormuz Chokepoint
The crisis has led to a near halt in tanker movements through the Strait of Hormuz.
With nearly 20 million barrels per day of crude and product exports currently disrupted, and limited alternative routes available, producers and consumers across the world are feeling the strain.
The oil production of Kuwait, Iraq, Saudi Arabia, and the United Arab Emirates collectively dropped by a reported 6.7 million barrels per day by 10 March, and by at least 10 million barrels per day as of 12 March.
Neil Atkinson, former head of oil at the International Energy Agency (IEA), said the effective closure of the Strait is something energy markets had never seen before.
Unless something changes very soon, “we are in a potentially game-changing and unprecedented energy crisis,” he told CNBC.
IEA Issues Emergency Response
IEA Executive Director Fatih Birol described the war as creating “a major energy crisis, including the largest supply disruption in the history of the global oil market.”
The IEA announced the largest emergency reserve release in its history at 400 million barrels and the U.S. committed to tapping 172 million barrels from the Strategic Petroleum Reserve over 120 days. So far, the releases have done little to contain prices.
The IEA has also outlined a set of demand-reduction measures for governments and households.
These include working from home, reducing highway speed limits, shifting to public transport, and increasing car sharing steps aimed at cutting oil consumption while supply remains constrained.
Asia Faces the Sharpest Squeeze
Dubai crude, the pricing benchmark for Asian buyers hit an all-time high above $150 a barrel last week.
In 2024, an estimated 84% of crude oil and condensate shipments through the Strait were destined for Asian markets, with China receiving a third of its oil via the waterway.
Rory Johnston, a commodities analyst specialising in oil, warned that the longer the Strait stays closed, the more Asia’s supply shortage becomes everyone’s problem.
Asian refiners are now sourcing barrels from further afield, a sign that regional scarcity could soon turn global.
Inflation and Economic Risks Mount
Analysts forecast that prices could add 0.8% to global inflation if disruptions persist.
Rising oil prices reduce the purchasing power of consumers, weigh on economic growth, and push up inflation, economists warn.
Analyst John Kilduff warned that if the Strait remains closed beyond two weeks, “you will see shortages in places like India, Japan, and South Korea.
They will start to rein in industrial production. They’re going to have to conserve to keep the lights on, literally.”
Could Prices Go Higher?
ExxonMobil’s chief economist Tyler Goodspeed said there are “many more scenarios, and more probable scenarios, in which the strait remains effectively closed harder for longer than there are scenarios in which normal traffic resumes.”
He added that Brent could climb to $135 per barrel if the situation worsens.
On the other hand, Kilduff noted there is “less reason to be worried about the U.S. right now,” pointing to strong domestic production and existing floating storage as near-term buffers.
On Thursday, oil prices briefly pulled back after Israeli Prime Minister Benjamin Netanyahu said Israel was helping the U.S. reopen the Strait and that the war “may end sooner than people think.”
Markets remain on edge. The next two weeks, analysts say, will be decisive.Markets remain on edge. The next two weeks, analysts say, will be decisive.
