The ongoing conflict in Iran has disrupted global supplies, leading to a surge in international oil prices on Monday (April 6th). Brent crude futures rose by $2.4, a 2.2% increase, reaching $111.43 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) futures increased by $3, a 2.7% rise, trading at $114.57 per barrel.
Prior to this, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) reached an agreement on Sunday to increase production quotas by 206,000 barrels per day starting from May. However, the implementation of this production increase plan is contingent upon the reopening of the Strait of Hormuz.
Since the end of February, the ongoing conflicts in the Middle East have resulted in the closure of the Strait of Hormuz, reducing crude oil exports from OPEC+ members such as Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq. These countries had the capacity to significantly increase production within the OPEC+ organization before the outbreak of the conflict. Sources within OPEC+ informed Reuters that once the waterway is reopened, the organization stands ready to ramp up production.
OPEC+ has also expressed concerns about attacks on energy facilities in various countries, stating that the repair costs of these facilities are high and time-consuming, which will impact the supply chain.
Industry experts have shown reservations towards the production increase measures. Energy consulting agency, Energy Aspects, believes that as long as the strait remains closed, the decision to increase production only holds “symbolic” significance.
Jorge Leon, the geopolitical analysis director at Rystad Energy and former OPEC official, emphasized that in reality, the increase in supply that OPEC+ can provide to the market is minimal.
He further stressed, “In reality, the additional production from OPEC+ becomes almost irrelevant when the Strait of Hormuz is closed.”
The Middle East conflict has triggered the most severe oil supply disruptions in history. Since the closure of the strait at the end of February, the global daily oil supply has decreased by approximately 12 to 15 million barrels, accounting for about 15% of the total global supply.
JPMorgan Chase has warned that if the blockade continues until mid-May, oil prices could skyrocket to a new high of $150 per barrel.
On Sunday, U.S. President Trump issued a final ultimatum to Iran on the social platform Truth Social, demanding the reopening of the strait.
He wrote, “Tuesday will be a day of power plants and bridges in Iran simultaneously. This will be an unprecedented scenario!!!”
Trump warned that if Iran does not reopen the strait, they will face hellish consequences.
Apart from the energy market, this crisis has severely threatened global food security. Bahrain’s Foreign Minister Abdullatif bin Rashid Al Zayani quoted estimates from the United Nations, stating that if the crisis continues, an additional 45 million people could face severe hunger, with approximately 4 million people in the Arab world potentially falling into poverty.
Zayani emphasized that Bahrain has submitted a draft resolution to the United Nations Security Council, highlighting that this crisis is not a regional dispute but a global emergency. He warned that without action, global food, medicine, and energy transport could face further disruptions.