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Investing.com -- Escalating tensions between Iran and Israel have pushed oil prices higher as markets react to potential disruptions in the strategically vital Strait of Hormuz, through which approximately 20% of global oil consumption flows, shipping service Signal Group highlighted in a recent report.
Brent crude rose from the mid-$60s to the mid-$70s as of Friday, June 13, reflecting market concerns about potential supply disruptions. This price movement mirrors early reactions seen during the Russia-Ukraine conflict, though prices have since moderated as tankers continue to pass through the strait unimpeded.
According to JPMorgan analysis, a worst-case scenario involving sustained conflict and disruption through the Strait of Hormuz could remove over 2.1 million barrels per day from global supply, potentially pushing Brent crude prices above $100 per barrel.
Israeli strikes reportedly targeted defenses near Iran’s key port of Bandar Abbas, although Iran maintains its operations remain unaffected. The risk of disruption has already increased estimated waiting times at Kharg Island port to eleven days before the end of last week, up from five days at the start of May.
Forward Freight Agreement (FFA) market analysts project VLCC earnings on the Middle East Gulf to China route to exceed $40,000 per day in July, reflecting growing uncertainty in the tanker segment.
Two scenarios appear most likely: a complete closure of the strait, which would trigger significant oil price spikes and global economic instability, or partial disruptions through attacks, vessel harassment, or mining operations.
A full closure remains unlikely, as it would severely impact Iran’s own oil revenue. China is Iran’s primary oil buyer, importing over 1 million barrels daily, making a sustained closure counterproductive to Iran’s economic interests.
In case of major disruptions, Saudi Arabia and the United Arab Emirates have alternative pipeline options that bypass the Strait of Hormuz. Saudi Aramco (TADAWUL:2222) operates the East-West crude oil pipeline with a capacity of 7 million barrels per day, while the UAE has a 1.5 million barrels per day pipeline connecting its onshore oil fields to the Fujairah export terminal on the Gulf of Oman.
The International Energy Agency is monitoring the situation closely but notes that oil markets remain well-supplied, with non-OECD+ supply forecast to increase by 1.3 million barrels per day this year, outpacing expected global demand growth of around 700,000 barrels per day.
Maritime security organizations, including BIMCO and the US-led Joint Maritime Information Center, have advised ship owners to implement defense measures and review contingency plans, though the JMIC confirmed on Friday that the Strait of Hormuz remains open with commercial traffic flowing uninterrupted.
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