Oil Market Faces Turbulent Week Amid Elevated Tensions Following Kharg Attack

Global Oil Markets Turmoil Continues Amid US-Iran Conflict

The global oil market is facing another week of uncertainty as tensions between the US and Iran escalate, threatening supply disruptions across the Middle East.

Key Developments:

• A US attack on Iran's main export hub, Kharg Island, has heightened risks to supply and deepened concerns over a conflict that has already disrupted global energy flows.
• The attack, which targeted military targets on Kharg Island, has prompted Iran to threaten retaliation against US-linked energy facilities in the region.
• The United Arab Emirates' Fujairah hub experienced loading operations interruptions after a drone strike, choking off shipments from the country's only export route while the Strait of Hormuz is blocked.

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Market Reaction:

• Crude benchmark Brent rallied 11% last week, reaching a high of $119.50 a barrel before closing just above $103.
• Analysts expect another nervy start to the week, with Kharg Island's fate unclear and its importance to global energy supply.

Supply Disruptions:

• The International Energy Agency has warned that the disruption to oil supply is unprecedented, and members have agreed to release 400 million barrels from emergency reserves to try to quell soaring prices.
• Traffic through the Strait of Hormuz, a vital maritime thoroughfare, has remained at a near-standstill since fighting began, with only a handful of vessels passing through.
• Energy Secretary Chris Wright has stated that the US Navy may not be able to start escorting tankers through Hormuz until the end of this month.

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Regional Impacts:

• Disruptions are rippling beyond crude, with products surging in price.
• India has started rationing gas supplies to industries, while jet-fuel costs have soared, and shortages of natural gas stand to limit fertilizer output.
• In the US, retail prices of gasoline and diesel have rallied in response to the supply disruptions.