The global oil and fuel markets are experiencing significant tightening and increased volatility due to ongoing global conflicts disrupting multiple supply routes. The Iran war, in particular, is no longer seen as a short-lived energy shock but a prolonged test of economic endurance, especially with crude oil prices back above $100 a barrel.
A critical Saudi oil pipeline, which had been the primary means of transporting Saudi crude to global markets during the Iran war, was attacked last week, forcing its closure. While a US Energy Chief stated the pipeline bypassing the Strait of Hormuz is expected to reopen "soon," the incident has forced Saudi Arabia to further increase its oil exports through the contested waterway.
The conflict's expansion into Yemen and drone strikes on Saudi infrastructure highlight the new, volatile phase of the war. These developments have diminished safeguards that initially cushioned the market seven months ago. The US administration, which initially suggested the war would last weeks, now predicts it will end only after the US midterm elections on November 3.
Adding to the supply concerns, the cost of hiring an oil tanker on the industry’s benchmark trade route has topped $1 million a day, reaching $1.035 million. This unprecedented surge is due to a shortage of ships willing to cross the Strait of Hormuz to collect cargoes amidst the war, making the benchmark route from the Persian Gulf to China less relevant.
