Middle East war creating ‘largest supply disruption in the history of oil markets’ | Oil
The World Energy Monitor has warned that oil markets are now facing the “largest supply disruption in history” as the war in Iran continues to prevent tankers from producing and transporting millions of barrels of crude each day.
The supply shock caused by Iran’s effective blockade of the Strait of Hormuz means the world faces a deeper crisis than after the Yom Kippur war in 1973 and the war that broke out in Ukraine in 2022, the International Energy Agency (IEA) said.
The warning came after Iran’s new supreme leader, Mojtaba Khamenei, made what was said to be the first statement calling for the vital trade artery to “remain closed” in a blow to hopes of finding a solution to the crisis.
By contrast, global oil prices rose back above $100 (£75) a barrel on Thursday as widespread Iranian attacks on energy facilities in the Middle East overshadowed the release of government reserves.
In a bid to calm oil supply concerns, the IEA ordered the largest release of government reserves in its history on Wednesday, when its 32 members unanimously agreed to release 400 million barrels of emergency crude.
In addition, the United States agreed to release 172 million barrels of crude oil from its strategic oil reserve, in the White House’s boldest attempt yet to lower oil prices.
Before this week, only four other coordinated strategic materials had been released since the IEA’s founding in 1974; This underlines the seriousness of the current crisis.
These include President George H. W. Bush’s military campaign against Iraq in 1991, following Operation Desert Storm; In 2005, when Hurricane Katrina halved US production in the Gulf of Mexico; With the intervention of NATO allies in the Libyan civil war in 2011; and after Russia’s large-scale invasion of Ukraine in 2022.
But despite coordinated efforts to allay fears of persistent supply shortages, the price of Brent crude rose above $100 a barrel overnight. The international benchmark later fell to $97 but rebounded to $101 following Mojtaba’s comments.
Wall Street opened lower; The Dow fell 1.1% and the S&P 500 fell almost 1% in early trading. In Europe, the FTSE 100 fell less than 1% while the Stoxx 600 fell nearly 1%. In Tokyo, Japan’s Nikkei 225 index and Australia’s S&P ASX 200 index fell 1.3%.
After Donald Trump vowed on Wednesday to “finish the job” and continue the US-Israeli war against Iran, the country’s regime stepped up retaliatory strikes against economic targets in the region. Many merchant ships were hit in and around the Strait of Hormuz, one of the most important arteries of world trade.
The United States signaled earlier this week that it would provide military escort to oil tankers seeking to pass through the strait, but Energy Secretary Chris Wright said Thursday it was “not ready” to offer that assistance. He added that it was “quite likely” that such escorts would happen by the end of the month.
The war with Iran is expected to reduce the region’s oil and gas production by at least 10 million barrels of oil per day, the IEA said on Thursday.
Escalating regional conflicts have damaged key oil and gas infrastructure, and many producers have begun to halt production as exports via the Strait of Hormuz decline and local storage facilities fill up.
In its report, the IEA said that the sharp decline in Middle East production could lead to a drop of 8 million barrels per day in global oil production this year, despite increased production in countries including Russia.
The report stated that the decline in global oil supply would far exceed the decline in global demand as a result of the war. The watchdog cut 1 million barrels of oil per day from global oil demand forecasts for this year due to reduced refining in the Middle East and decreased air travel.
The impact of rising energy costs is also expected to weigh on global economic growth, which could cause demand to fall further, but the IEA said it was too early to tell how big the impact might be.
The global oil shortage is expected to put pressure on the market, which is already experiencing wild fluctuations as the war progresses.
The price of oil surpassed the $100 mark for the first time in four years on Monday; It rose as much as 29 percent to $119, before falling sharply after Trump described the war as “very complete” in a series of contradictory statements. The price of oil was $60 per barrel at the beginning of the year.
As prices began to rise again, Iran’s military command provoked the United States. “Be prepared for oil to reach $200 a barrel, because the price of oil depends on regional security, which you are destabilizing,” a spokesman said.
Trump later said on Truth Social that skyrocketing oil prices would ultimately “make a lot of money.” The USA, one of the world’s largest exporters. He made the claim amid growing criticism of the war as Americans face rising gas prices at the pump.
