Oil: Threat of supply disruption increases as Hormuz closure looms – Danske Bank

Oil and Gas Markets Face Major Turmoil Amid Escalating Middle East Tensions

The Danske Research Team reports that the ongoing conflict involving the United States, Israel, and Iran has caused significant upheaval in the oil and gas sectors. Shipments through the Strait of Hormuz have been severely disrupted, resulting in large quantities of stranded cargo and a sharp increase in freight rates.

Energy Prices Surge as Regional Instability Intensifies

Recent price spikes are attributed to mounting concerns over supply, following precautionary closures of essential oil and gas infrastructure in the Middle East. Military actions by Israel and the US against Iran, coupled with Iran's retaliatory strikes, led QatarEnergy to suspend LNG production after its facilities were damaged by Iranian drones. Saudi Arabia also temporarily closed its Ras Tanura refinery, a key hub for crude exports, in response to a drone attack.

The critical Strait of Hormuz has effectively halted shipping, leaving 77 million barrels of oil trapped on 150 tankers within the Persian Gulf. While an Iranian Revolutionary Guards representative announced the closure of the strait and threatened vessels attempting passage, US Central Command maintained that the route remains accessible.

Despite these assurances, maritime traffic is expected to remain paused until safety can be guaranteed. The ongoing disruptions have further strained global supply chains, causing benchmark freight rates to reach unprecedented levels—doubling since Friday. LNG tanker daily rates soared by over 40% on Monday after Qatar's production stoppage, heightening worries about potential energy shortages worldwide.