Speedboats of the paramilitary Basij force cruise along the Persian Gulf near the Bushehr nuclear power plant during the IRGC’s maritime parade commemorating the Persian Gulf National Day in southern Iran, on April 29 year 2024.
Nurphoto | Nurphoto | Getty Images
Escalating conflict in the Middle East has spurred the world’s most important oil artery returned to the global spotlight.
the Strait of Hormuz widely recognized as an important oil transportation choke point. Located between Iran and Oman, the waterway is a narrow but strategically important waterway, connecting crude producers in the Middle East with key markets around the world.
In 2022, oil flow through the Strait of Hormuz will average 21 million barrels per day, according to of the US Energy Information Administration (EIA). This is equivalent to about 21% of global crude oil trading.
The inability of oil to get through a major choke point, even temporarily, could push up global energy prices, increase transportation costs and create significant supply delays.
For many energy analysts, an event where there is a blockage or significant disruption to flows through the Strait of Hormuz is considered a worst-case scenario – one that could send oil prices soaring. over 100 USD per barrel.
“The worst case scenario could happen if Israel attacks Iran [and] Iran takes actions to slow down or potentially try to block the Strait of Hormuz,” Alan Gelder, energy analyst at Wood Mackenzie, told CNBC.European Squawk Box” on Monday.
“[This] will have a much stronger impact because that is where 20% of global crude oil exports pass through from countries like Saudi Arabia, Kuwait and Iraq – and the UAE to some extent – which hold the global spare capacity,” Gelder said.
“So we think the market is not pricing in a worst-case scenario, but is pricing in the potential impact on Iran’s energy infrastructure,” he added.
Israel’s promise to respond to Iran after the attack ballistic missile attack Last week sparked speculation that the country could soon launch an attack on Tehran’s energy infrastructure.
Iran, which has pledged a strong response in the event of any further action by Israel, is an important player in the global oil market.
How high can oil prices rise?
Energy analysts do interrogate Whether the oil market is too complacent in the face of the risk of widening conflict in the Middle East?
Saul Kavonic, senior research analyst at MST Financial, said supply disruptions along the Strait of Hormuz could send oil prices significantly higher.
“If we see an attack on Iranian production, about 3% of global supply could be cut, and even if we only see tighter sanctions, that could also start cutting supply by up to 3%. reaching 100 or even exceeding $100 per barrel,” Kavonic told CNBC.Squawk Box Asia” on October 3.
“What if [transit through the Strait of Hormuz] affected, we’re talking about an impact on oil prices that will be three times larger than the oil price shock in the 1970s after the Iranian revolution and the Arab oil embargo, and now we’re talk about over $150 a barrel of oil,” he added.
Oil price trade more more than 3% on Monday, extending gains even after posting its strongest weekly gain since the start of 2023 last week.
International benchmark Brent oil Crude oil futures expiring in December last traded down 1.5% at $79.74 a barrel, while U.S. crude prices West Texas Intermediate Futures stood at $75.99, down 1.5%.
Bjarne Schieldrop, chief commodities analyst at Swedish bank SEB, said the general rule in commodity markets is that if supply is severely constrained, prices will typically spike to five to 10 times normal levels.
“So if worst comes to worst and the Strait of Hormuz is closed for a month or more, Brent crude will likely spike to $350/bbl, the world economy will be in recession and oil prices will fall below 200 USD/barrel. b again for a while,” Schieldrop said Friday in a research note.
“But seeing where oil prices are currently, the market doesn’t seem to have much chance of such a development,” he added.
What about the gas market?
Warren Patterson, head of commodity strategy at Dutch bank ING, speak Any disruption in shipping along the Strait of Hormuz would have seismic consequences for global energy markets.
“The main concern, although still extreme, is that these disruptions spill over into the Strait of Hormuz, affecting oil flows of the United States,” Patterson said in a research report published on October 4. Persian Gulf”.
“A significant disruption to these flows would be enough to push oil prices to new record highs, surpassing the record high of nearly $150/barrel in 2008,” he added.
View looking north showing the Strait of Hormuz, connecting the Gulf of Oman with the Persian Gulf, with the Zagros Mountains and Iran’s Qeshm island in the background, and areas of Oman, Muscat and the United Arab Emirates in the foreground, top view of Space Shuttle Columbia during shuttle mission STS-52, from October 22 to November 1, 1992.
Space Frontier | Image Archive | Getty Images
ING’s Patterson said any supply disruptions related to the Strait of Hormuz would not be isolated to the oil market.
“It is also likely to lead to disruption in [liquified natural gas] flows from Qatar, accounting for more than 20% of global LNG trade,” he continued.
“This will be a shock to the global gas market, especially as we enter the Northern Hemisphere winter where we see stronger demand for gas for heating purposes. While we are seeing new LNG export capacity increase, this is not enough.” Qatar’s export volume.”
