Key Highlights
- Oil prices surged after Iran’s Revolutionary Guards threatened attacks on regional energy infrastructure.
- Disruptions in the Strait of Hormuz have raised serious concerns about supply.
- Production cuts and halted shipments are impacting global oil and gas markets.
Oil prices climbed sharply on Wednesday, rising more than 5%, after Iran issued fresh threats to target energy facilities across the Middle East. The warning came as retaliation amid ongoing conflict in the region, increasing fears of further disruptions to global energy supplies.
Brent crude futures rose by $5.26, or 5%, reaching $108.66 per barrel during trading, after touching a session high of $109.95. Meanwhile, U.S. West Texas Intermediate (WTI) crude gained $2.44, or 2.54%, to $98.65. WTI also recorded its widest discount to Brent since May 2019, reflecting concerns about a prolonged conflict.
Attacks on Energy Infrastructure Intensify Concerns
Tensions escalated further after Iran’s South Pars gas field was hit, marking the first reported strike on Iranian energy infrastructure in the Gulf during the ongoing conflict. Following the incident, Tehran warned neighboring countries that their energy installations could be targeted in the coming hours.
According to SEB analyst Ole Hvalbye, attacks on key energy sites such as the South Pars field are contributing to rising oil and gas prices. He added that any further escalation involving energy infrastructure would likely continue pushing prices higher.
The broader conflict has already disrupted oil and natural gas exports across the Middle East, forcing production stoppages in several areas.
Strait of Hormuz Disruptions Impact Global Supply
The situation has significantly affected shipments through the Strait of Hormuz, one of the world’s most critical energy corridors. The route handles around 20% of global oil and liquefied natural gas supply, making any disruption a major concern for global markets.
Fighting in the region has halted shipments through the strait, contributing to estimated production cuts of between 7 million and 10 million barrels per day. This represents roughly 7% to 10% of global demand.
Limited Relief Measures and Ongoing Supply Challenges
To ease pressure from rising prices, the United States announced a 60-day waiver of the Jones Act, allowing foreign-flagged vessels to transport fuel and other goods between U.S. ports. Additionally, a general license was issued permitting certain transactions involving Venezuela’s state oil company, PDVSA.
In Iraq, exports resumed through pipelines after an agreement between Baghdad and the Kurdistan Regional Government. However, supply relief remains limited, with production still significantly below pre-crisis levels and tanker traffic through the Strait of Hormuz largely restricted.
Meanwhile, Libya reported that flows from the Sharara oilfield are being redirected through alternative pipelines following a fire.
Market Remains Volatile
The situation remains uncertain as military activity continues in the region. The U.S. military has targeted sites along Iran’s coastline near the Strait of Hormuz, citing risks posed by anti-ship missiles to international shipping.
At the same time, U.S. crude inventories rose by 6.2 million barrels to 449.3 million barrels in the week ending March 13, according to official data, exceeding expectations.
With ongoing disruptions, threats to infrastructure, and restricted shipping routes, oil markets are expected to remain volatile in the near term.