Global energy markets were jolted within 24 hours as escalating conflict across the Middle East disrupted oil, liquefied natural gas (LNG), and refined product flows, pushing Brent crude to 84 dollars per barrel and raising expectations of a potential move toward 90 dollars.
The sharp market reaction follows intensifying hostilities involving Israel, the United States, and Iran, alongside reported strikes on critical energy infrastructure and shipping assets across the Persian Gulf.
Strait of Hormuz Traffic Effectively Stalls
Although not formally declared closed, the Strait of Hormuz has seen no crude oil or LNG transits on March 2 and 3, according to shipping data. Dozens of fully loaded vessels remain anchored in the Gulf, awaiting clarity on regional security conditions.
Market observers have long cited a potential Hormuz closure as a major bullish catalyst. However, shipping disruptions over the past two days indicate that the chokepoint is already operating under severe constraints.
The U.S. Central Command stated that the Strait remains “not closed despite statements by Iranian officials.” At the same time, Saudi Arabia confirmed it would redirect all oil exports through the Red Sea to bypass the Hormuz Strait.
Data from Kpler show that 55 fully loaded Very Large Crude Carriers (VLCCs) are currently in the Gulf, an increase of 18 vessels since Israel’s initial strike on Iran on February 28.
The Strait typically handles between 20 million and 21 million barrels of crude, condensate, and petroleum products daily, accounting for roughly one-fifth of global consumption and nearly one-third of seaborne oil trade.
Infrastructure Strikes Deepen Market Anxiety
Security incidents have compounded supply concerns. Drone strikes reportedly targeted Saudi Arabia’s largest refinery, the 550,000 barrel-per-day Ras Tanura facility, causing a shutdown after a fire broke out.
In Qatar, production was halted at the Ras Laffan liquefaction complex, the world’s largest LNG facility, after reports of drone activity targeting energy infrastructure near Mesaieed.
Israel’s Energy Ministry also ordered the temporary shutdown of its offshore gas platforms, including the Leviathan field, which supplies about 40 percent of domestic gas demand, citing security concerns.
Meanwhile, Kurdish oil producers in northern Iraq began curtailing output after drone strikes on U.S. installations in Erbil, with an estimated 110,000 barrels per day reportedly taken offline.
OPEC+ Takes Measured Approach
Despite mounting pressure from markets, OPEC+ opted for a relatively modest 206,000-barrel-per-day production increase for April 2026. The decision reflected caution amid uncertainty over Iranian supply and potential disruptions through Hormuz.
Freight, Insurance, and Product Markets Surge
Freight rates for VLCC tankers have surged amid the risk of vessel attacks or stranding in the Gulf. A voyage from the Gulf to China now costs 89 dollars per metric tonne, representing a 560 percent increase since early January.
Marine insurers are also tightening coverage. Several major protection and indemnity clubs have announced plans to cancel or restrict war risk insurance for vessels entering Hormuz beginning March 5, citing escalating risks.
Refined product markets have experienced parallel volatility. Asian naphtha premiums have climbed to their highest level since April 2022, reaching a 135-dollar-per-tonne premium to Brent amid fears that Middle Eastern supply could remain stranded.
S&P Global Platts has suspended bids and offers for several Middle Eastern crude, refined product, and LNG benchmarks, limiting assessments primarily to Murban and Oman grades.
Corporate and Strategic Shifts
Energy companies are adjusting strategies in response to heightened risks. Shell is reportedly considering selling its minority stake in Australia’s North West Shelf LNG project, potentially in a deal valued at up to 24 billion dollars.
Equinor is evaluating a divestment of its Angolan assets as part of a broader portfolio shift, while Angola’s national oil company Sonangol is advancing preparations for a potential initial public offering that could involve 30 percent of its shares.
Saudi Aramco has notified buyers that crude exports will be loaded exclusively from its Red Sea port of Yanbu for an unspecified period, utilizing the kingdom’s East-West pipeline to maintain flows while bypassing Hormuz.
Market Outlook
With Brent trading at 84 dollars per barrel and LNG prices reportedly rising by 15 dollars per MMBtu during the escalation, analysts warn that sustained disruption could push oil prices toward the 90-dollar mark or higher.
The rapid sequence of strikes, shipping disruptions, refinery shutdowns, and insurance withdrawals within a single day has underscored the vulnerability of global energy supply chains to concentrated geopolitical risk in the Gulf region.
Market direction will likely hinge on whether shipping through Hormuz resumes and whether further infrastructure damage is avoided in the coming days.