Iran war threatens prolonged hit to global energy markets

The U.S.-Israeli war with Iran could leave consumers and businesses worldwide facing weeks or months of higher fuel prices even if conflict ends quickly, as suppliers grapple with damaged facilities, disrupted logistics, and elevated risks to shipping.

“The market is shifting from pricing pure geopolitical risk to grappling with tangible operational disruption, as refinery shutdowns and export constraints ‌begin to impair crude processing and regional supply flows,” JP Morgan analysts said in a research note.

The conflict has already led to the suspension of around a fifth of global crude and natural gas supply, as Tehran targets ships in the vital Strait of Hormuz between its shores and Oman, and attacks energy infrastructure across the region.

Global oil prices have surged more than 25% since the start of the war, driving up fuel prices for consumers worldwide.

A quick end to the war would soothe markets. But a return to pre-war supply and pricing could take weeks or months, depending on the extent of the damage to infrastructure and shipping.

The biggest question for energy supplies is how and when the Strait of Hormuz will become safe for shipping again. Trump has offered ‌naval escorts to ⁠oil tankers and promised U.S. insurance support to vessels in the region. But safety in the waterway may be elusive, as Iran has the capacity to sustain drone attacks on shipping for months, intelligence and military sources have said.

Disruption has given Russia a boost. Prices for Russian crude cargoes have risen as the U.S. has given Indian refiners a 30-day waiver to buy Russian crude to substitute for lost Middle East supply. Washington had pressured India to cut Russian oil imports under the threat of tariffs.

Source: reuters.com