Global oil markets endured another week of acute stress as military tensions in the Middle East intensified. Israel’s strike on Iran’s South Pars gas field, which accounts for 70% of Iran’s production, triggered a wave of retaliatory attacks from Tehran across the region. Energy infrastructure in Qatar, Saudi Arabia, the UAE and Kuwait has been hit, including severe damage to Ras Laffan, the world’s largest LNG export facility.
Meanwhile, the Strait of Hormuz, a critical artery for global oil and gas shipments, remains effectively paralysed. Alternative routes are scarce: Iraq has restarted exports of 250,000 barrels per day through a pipeline to Turkey, but this remains marginal compared with the millions of barrels stranded in the Gulf.
A market split between geopolitical risk and logistical reality
The disruption at Hormuz has created an immediate supply shock, forcing major Gulf producers to cut output to avoid overwhelming their storage capacity. This tension is reflected in a sharp divergence between the world’s two benchmark crude prices:
- Brent trades around $108, having touched $118 this week; fully pricing in geopolitical risk and maritime disruption.
- WTI, anchored to the US domestic market, remains near $96, insulated from the logistical bottlenecks gripping the Gulf.
The LNG market is also under severe strain. Damage to Ras Laffan threatens global supply at a time when Europe and Asia remain heavily dependent on Qatari exports. Volatility in gas markets is likely to intensify.
Prolonged volatility and a reshaping of global energy routes
In the short term, markets will remain dominated by volatility, risk premiums and the possibility of further military escalation. Over the medium term, the crisis could accelerate:
- diversification of export routes away from the Gulf,
- investment in overland pipelines and alternative infrastructure,
- expansion of renewable and non‑Gulf energy sources,
- a reassessment of global storage and supply‑security strategies.
The current shock underscores a familiar truth: geopolitics remains the primary driver of oil prices, and the world’s dependence on Gulf maritime routes continues to be a structural vulnerability.