Global energy supply chains faced disruptions as oil prices soared sharply at the start of Sunday trading following U.S. and Israeli attacks on Iran and Iran’s retaliatory strikes against Israel and U.S. military bases.
Traders worry that oil supplies from Iran and other Middle Eastern regions may slow or even halt. Attacks, including those on two vessels transiting the narrow Strait of Hormuz in the Persian Gulf, have constrained these nations’ ability to export oil globally. Energy experts note that crude and gasoline prices could rise further if the attacks persist.
West Texas Intermediate (WTI) crude traded at around $72 per barrel in Sunday evening trading, up about 8% from Friday’s level of approximately $67. International benchmark Brent crude traded at around $79 per barrel, also up about 8% from Friday’s $72.87.
According to Rystad Energy, approximately 15 million barrels of crude oil (about 20% of global total) pass through the Strait of Hormuz daily, making it the world’s most critical oil chokepoint. Tankers transiting the strait carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates, and Iran.
Iran temporarily closed parts of the strait in mid-February for so-called military exercises. Should the waterway be blocked again, it could lead to reduced oil supplies and higher prices.
Against this backdrop, eight members of the Organization of the Petroleum Exporting Countries Plus (OPEC+) announced on Sunday they would increase crude production by 206,000 barrels per day in April, exceeding analysts’ expectations. The production-boosting nations include Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman.
Commentary:
This wave of Middle East conflict underscores the vulnerability of the oil supply chain and the global impact of war on the world energy market. Military strikes by the U.S. and Israel against Iran, followed by Iran’s retaliatory attacks on Israeli and U.S. military bases, have sharply heightened market uncertainty over crude oil supply. Indeed, both West Texas Intermediate (WTI) and Brent crude prices surged approximately 8% within days, underscoring the market’s extreme sensitivity to supply disruptions.
Although OPEC+ member countries announced production increases to partially offset supply risks, the scale of these increases remains limited and unlikely to fully alleviate market concerns in the short term. Longer-term, if the conflict persists, crude oil and gasoline prices may climb further, exerting pressure on the global economy. Inflation and production costs in energy-dependent countries will be particularly affected.