Due to the conflicts in the Middle East causing a near-complete halt in shipping in the Hormuz Strait, Brent crude oil futures broke through $90 per barrel for the first time in nearly two years on Friday (March 6) and are expected to record the biggest weekly gain in years.
The disruption in Middle East supply and the obstruction of oil tanker traffic in the Hormuz Strait have caused turmoil in the global energy market.
The global benchmark Brent crude oil price rose by 7.6% on Friday, surpassing the $90 per barrel mark, while the price of West Texas Intermediate crude oil also broke through $85 per barrel for the first time since April 2024. The key Middle Eastern marker, Murban crude oil price (the crude oil indicator most closely watched by Asian countries), approached the $100 per barrel mark, trading at $99.60 per barrel.
The Wall Street Journal reported on Friday that Kuwait, an oil-producing country in the Middle East, has begun to reduce production in some oil fields as all storage facilities are full. This is the latest sign of impact on oil supply in the Middle East region.
Citigroup estimates that due to the disruption in shipping in the Hormuz Strait, the oil market is losing between 7 and 11 million barrels of supply per day.
The narrow waterway of the Hormuz Strait carries about one-fifth of the global oil trade volume, making it one of the most critical chokepoints in the global oil system. Even localized interruptions or potential risks in oil tanker transportation in the past have led to rapid oil price fluctuations as traders rush to incorporate supply uncertainty into prices.
Since February 28, following the military conflict between the US-Israel and Iran, Iran has been continuously attacking energy facilities in the Gulf region and vessels passing through the Hormuz Strait. At least nine vessels have been retaliated against by Iran in the region so far.
Iran’s missile range extends to Cyprus, Azerbaijan, and Turkey, disrupting the global market and prompting major economies to issue warnings about inflation risks.
Vortexa ship tracking data shows that on March 1, the second day after the conflict erupted, the number of oil tankers passing through the Hormuz Strait plummeted to 4 vessels. This is a significant decrease from an average of 24 tankers passing through the strait daily since January.
According to data from Vortexa and ship tracking company Kpler, there are still approximately 300 oil tankers stranded in the strait.
The multinational naval consulting organization, the United Maritime Command, stated that commercial traffic in the Hormuz Strait has been “almost completely” stalled. The reason for the traffic paralysis is attributed to “security threats, insurance limitations, operational uncertainties, and actual interruptions.”
The recent surge has pushed oil prices to their largest weekly gain in nearly four years. The market is increasingly concerned about the logistical challenges the Persian Gulf region may face, with the potential for these challenges to further escalate if tensions worsen.
US President Trump has hinted at taking “immediate action” to alleviate oil price pressures.
Market analysts speculate that multiple countries may coordinate to release emergency oil reserves to maximize their effect.
It is reported that Japan is considering using its oil reserves but has not taken any action yet. As Murban crude oil approaches $100 per barrel, Asian refiners are facing the dilemma of rapidly rising raw material costs.
The spike in Murban crude oil prices indicates that the market most reliant on Persian Gulf crude oil exports – Asia – is feeling the pressure.
Qatar’s Energy Minister has warned that oil prices could reach $150 per barrel.
Qatar’s Energy Minister Saad Sherida Al-Kaabi told the Financial Times that if oil tankers and other commercial ships cannot pass through the Hormuz Strait, oil prices could skyrocket to $150 per barrel within two to three weeks.
Iranian Foreign Minister Abbas Araghchi said in an NBC News interview on Thursday that Iran is not interested in negotiations and is prepared for a ground invasion. US President Trump later stated in an NBC interview that he had not considered taking such action.
Early on Friday, Trump set conditions for the US to cease actions against Iran on the social media platform Truth Social. He wrote that the US would not reach any agreement with Iran unless they unconditionally surrender.
Iran has launched a series of missiles and drones towards the Gulf coastal countries, and Israel has resumed airstrikes against Iran.
Goldman Sachs warned that if the Hormuz Strait remains disrupted, oil prices could significantly increase.
Samantha Dart, Co-Head of Global Commodity Research at Goldman Sachs, told Bloomberg, “Assuming very low oil flows through the Hormuz Strait over the next five weeks, Brent crude oil prices could break through $100 per barrel.”
However, Goldman Sachs’ current fundamental expectation is that oil transport volumes will gradually recover, with futures prices averaging $76 per barrel in the second quarter.