The price of oil surged to nearly $120 a barrel on Monday following Israeli strikes on Iran's energy infrastructure over the weekend and Tehran's de facto closure of the Strait of Hormuz. This escalation in the 10-day-old conflict sent fresh shockwaves through global energy markets, with Brent crude reaching $119.50 before retreating to around $100.

The closure of the Strait of Hormuz, a critical chokepoint carrying about one-fifth of the world's oil supply, has halted nearly all commercial traffic, leaving tankers stranded. This has created a severe logistical crisis for oil-producing Gulf states—Saudi Arabia, the UAE, Qatar, Kuwait, and Bahrain—which are already grappling with damaged facilities from Iranian attacks.

According to calculations by the US bank JP Morgan, Gulf nations collectively have about 343 million barrels of oil in storage, providing a buffer of just 22 days. Iraq, which had only six days of storage, has likely already exhausted its capacity and cut output by around 1.5 million barrels per day last week. Norwegian research firm Rystad Energy warned that Iraq's remaining operational oil fields "face an imminent, near-certain shutdown."

Saudi Arabia and the UAE are attempting to reroute some exports via alternative pathways—the Red Sea port of Yanbu and Fujairah, respectively—but these routes can handle only about a third of the oil that typically flows through the Strait. Fujairah itself has also been struck by Iran. The Financial Times reported that Saudi Arabia appears to have already reduced oil production despite having additional storage capacity, with similar cuts noted in Kuwait and the UAE.

A prolonged conflict risks a complete halt to much of the Gulf's oil production and exports, which would almost certainly propel prices significantly higher. Qatar's Energy Minister told the Financial Times that crude could hit $150 a barrel if the situation isn't resolved soon. The International Energy Agency (IEA) warned that "prolonged supply disruptions" could flip the market from a "significant surplus" into a "deficit." Despite Iranian President Masoud Pezeshkian's apology and vow to stop attacks, strikes have continued, including a drone attack on Bahrain's Al Ma'ameer oil refinery complex.

Source: www.dw.com