Hormuz Nearly Stalls, Oil Sits
Oil prices surged as the initial impacts of the Middle East war began to be felt: tanker traffic in the Strait of Hormuz nearly ground to a halt, while disruptions to energy facilities—including a major refinery in Saudi Arabia—also rattled the market. This triggered a surge in supply risk premiums and made the energy market highly volatile.
Brent futures closed up around 6.7% to US$78 per barrel, marking the largest daily gain since June 2025. After closing, Brent continued to strengthen following a statement by the Iranian Revolutionary Guard Corps (IRGC) spokesman, who, according to state media, emphasized that Iran would not allow oil to leave the region. On the refined product side, diesel futures—often called the “engine” of the global economy—closed at a nearly four-year high.
From Washington, signals about the duration of the conflict were also mixed. President Donald Trump said the war was projected to last four to five weeks, but added that the US was prepared to fight longer if necessary. Meanwhile, US Defense Secretary Pete Hegseth rejected the idea of a “never-ending” war. Meanwhile, Iranian security officials have stated that negotiations will not take place, adding to the uncertainty surrounding the conflict.
This war marks a dangerous new phase for the Middle East and the global oil market. Iran may only pump around 3.3 million barrels per day (about 3% of global output), but its influence is significant due to its strategic location near the Strait of Hormuz. This waterway serves as a bottleneck for energy supplies: oil from the Persian Gulf must pass through Hormuz to reach key markets like China, India, and Japan. The strait handles about a fifth of global oil trade and a similar portion for LNG.
Several institutions have warned that if the conflict prolongs, oil prices could reach triple digits. Estimates suggest that a closure of Hormuz for around 25 days could fill the storage tanks of producing countries, forcing production cuts. Insurance markets are reportedly scrambling to re-price risk, as shipping security threats increase and many shipowners opt to suspend routes.
The physical impact on energy assets is already evident. Saudi Aramco reportedly halted operations at its Ras Tanura refinery after a drone attack in the area, although crude oil flows from nearby ports are still flowing. In Europe, LNG prices surged after Qatar halted output at the world's largest LNG export facility following a drone attack. Offshore, a US-flagged tanker involved in a military fuel supply program was reportedly hit, and several other vessels were also targeted—prompting authorities to call the threat level "critical" and more vessels opting not to sail.
While this oil rally is the largest since early 2022, the next direction remains uncertain. One reason prices have not surged more drastically is that the oil market has been relatively well-supplied for about a year. However, supply risks are growing on the other side: loadings have been halted at Russian oil terminals following the Ukrainian drone attack. Amidst this, OPEC+ agreed to increase production quotas next month by 206,000 barrels per day, although its effectiveness could be limited if major shipping routes remain disrupted.
At the close of trading, Brent for May settlement rose 6.7% to US$77.74/barrel in New York, having earlier reached US$82.37. Meanwhile, WTI for April delivery rose 6.3% to US$71.23/barrel.
Source: Newsmaker.id
