Dealing with oil market turmoil from Iran and Israel
On June 13, Israel launched an unprecedented wave of air strikes in Iran, and Tehran responded with hundreds of ballistic missiles in Israel. The benchmark Brent crude prices continued to panic as benchmark Brent crude prices rose 10% to above $77 by the start of next week amid a wealth of potential supply risks and uncertainties.
The GlobalData Oil & Gas Research team is trying to address key concerns, adjust for potential market overreactions to Israeli-Iranian hostilities, and calibrate the strait of the risk of Hormuz closure, impacts on Iran’s petroleum infrastructure, incidental impacts on Egypt and Jordan, premiums and escalations.
The possibility of a complete closure of the Strait of Hormuz remains very low. Currently, around 30% of the world’s maritime oil trade and 20% of the shipments of liquefied natural gas (LNG) have passed this strategic chokepoint. Approximately 80% of oil and LNG exports from Gulf countries are shipped to the Asian market via the strait, and Iran’s oil exports to China all depend on this route as well. For Iran, there is no practical incentive to block the straits. This is the economic lifeline of the country, so about 80% of imported goods pass through this passage. Therefore, a move to shut it down would put Iran’s trade flows and exports in the broader regions at risk.
Most of Iran’s crude oil exports are shipped from the Hague Island on the Gulf Coast. At present, the risk of direct attacks on the island appears to be limited, and as the island hosts multiple export terminals, even if it is targeted, such actions are likely not sufficient to completely halt Iran’s oil exports. Furthermore, Iran has alternative export routes that include other ports such as Bandar Abbas and Bandar Mahshahr.
The most notable alternative is the Jask pipeline, which bypasses the Strait of Hormuz and connects western oil-producing regions to export terminals in the Gulf of Oman. The pipeline was used in October 2024 to ship Iran’s first crude oil cargo via Jask. However, its export capacity was significantly lower than Kharg’s terminals and did not support blended exports, allowing only stabilizing temporary disruptions and meeting key delivery. Iranian exports, primarily towards China, are managed through informal channels, using ship-to-ship transfers and using reflection, and are unlikely to be affected by further sanctions. In fact, the escalation of US-China trade tensions provides a robust off-take to Iran’s oil production.
Source: Iran’s Ministry of Oil.
Egypt and Jordan are among the countries most affected by the recent escalation between Israel and Iran. On October 13, Israel halted production to operators of the “Leviathan” and “Karish” gas fields, destroying gas supplies to both Egypt and Jordan. In response, the two countries are taking emergency measures to prevent power outages in households, including the temporary closure of industrial facilities connected to the national grid.
Egyptian fertilizer plants have been hit particularly hard. Despite gas flows to Egypt and Jordan resumed on Thursday, ongoing military tensions and the risk of attacks on gas platforms in the Eastern Mediterranean could prompt Israel to halt production again.
In particular, the Middle East has seen a steady increase in war risk premiums worldwide. After Israel was attacked by Iran, the maritime war risk premium rose to 0.3% of the ship’s value, up 60% from 0.125%. Further escalations could raise the costs of doing business across the Middle East, even for cyber. The physical supply remains intact, but prices could rise as the inflated crude oil is being fed to Asia and Europe.
The recent surge in oil prices after last Friday’s attack on Israel was driven primarily by market panic over the risk of wider conflict and potential disruptions to the local energy supply. This price transfer does not reflect a fundamental change in the underlying market situation.
Although complete losses in Iran’s oil exports remain rare, the supply gap could be offset relatively quickly. China currently has a rough inventory, and OPEC members have the ability and willingness to increase output as needed to stabilize the market.
The recent escalation of hostilities between Israel and Iran has undoubtedly sent shockwaves through the global oil market, proven by the sharp rise in Brent oil prices. However, careful investigations have revealed that the fundamental dynamics of oil supply and demand remain largely intact. Because the possibility of a complete closure of the Strait of Hormuz is minimal, and such actions are economically harmful to Iran itself. Furthermore, the resilience of Iran’s diverse export routes and its petroleum infrastructure suggests that export disruptions may be manageable.
Neighborhood countries such as Egypt and Jordan face immediate challenges from disrupting gas supply, but the broader impact on the oil market appears to reflect more speculative panic than actual supply constraints. As the situation evolves, it is important for stakeholders to closely monitor development, particularly regarding premiums and potential geopolitical impacts. On the other hand, we recognize that OPEC’s ability to stabilize the market remains an important mitigation factor for long-term price volatility.
Stay tuned at GlobalData for detailed analysis of energy development, major disruptions and comprehensive data Oil and Gas Intelligence Centre insight.
“Dealing with Oil Market Disturbance from Iran and Israel” was originally created and published Offshore Technologya brand owned by GlobalData.
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