FACTBOX: Iran vows to keep Hormuz closed as oil hits multiyear highs

Iran's new supreme leader, Mojtaba Khamenei, has vowed to keep the Strait of Hormuz closed, as the war in the Middle East entered its 13th day with crude prices surging despite upcoming strategic petroleum reserve releases.

The comments came as the International Energy Agency declared that the war had caused the "largest supply disruption in history," forcing global oil production to four-year lows. A day earlier, IEA members had committed to a record 400 million barrel oil stock release to relieve the growing supply crunch, though the agency cautioned in its closely watched monthly oil market report that the move "remains a stopgap measure."

Meanwhile, the US military said it is not yet ready to escort commercial tankers through the strait, with Energy Secretary Chris Wright saying that escorts could begin by the end of March.

"The global oil market is acutely unbalanced with stranded surplus in the Persian Gulf and tightening supply in Asia as stocks draw down," analysts with S&P Global Energy CERA said in a March 12 note. "Markets will have a hard time regaining their balance until well after flows from the Strait of Hormuz resume."

The following are the latest developments in the Middle East oil supply shock:

Trade flows

The closure of Persian Gulf export routes has caused unprecedented supply disruptions, with regional producers shutting in massive volumes of crude and condensates.

• Regional suppliers have cut crude production by at least 8 million b/d and shut in an additional 2 million b/d of condensates and natural gas liquids, the IEA said March 12.
• Some 15% of TotalEnergies' total upstream oil and gas production has been taken offline by the ongoing war in the Middle East, the French supermajor said in an update.
• Global oil supply is expected to drop by 8 million b/d in March to 98.8 million b/d, its lowest since Q1 2022, with losses only partly offset by US, Russian, and Kazakh supply rebounds.
• Total exports of crude and condensates from the Persian Gulf fell to 6.28 million b/d in the week ended March 11, down from 17 million b/d a week earlier, according to S&P Global Commodities At Sea data.
• The March 11 weekly total represents the first full week of data reflecting impacts of the war, which started Feb. 28, and marks the lowest since CAS tracking began in 2016.
• Russian crude flows into India and China were up strongly in the first week of March, as Middle East supply shut-ins have put renewed focus on alternative supply routes.
• Saudi Arabia is sending more crude through Egypt's SUMED pipeline as OPEC's biggest producer looks to get its crude out of the Gulf.
• Iraq shut in production at its South Rumaila field as it lost access to its primary export route through Basrah port, which relies on the Strait of Hormuz. It will transport 200,000 b/d of crude by tanker truck via Turkey, Syria, and Jordan, oil minister Hayan Abdulghani said March 12, as the country seeks workarounds.
• Operations at Iraq's Basrah port were fully suspended March 12 after two vessels involved in ship-to-ship transfers were attacked overnight, the official Iraq News Agency reported.
• An export agreement using the Iraq-Turkey pipeline that delivers to Ceyhan port is "close to being signed," Abdulghani said, potentially adding 200,000-450,000 b/d of northern export capacity.
• China has more than 1.2 billion barrels of crude in storage after a year of aggressive stockpiling, representing 15% of global oil inventories, the IEA said.
• The US government is weighing a waiver of the Jones Act, a White House spokesperson confirmed on March 12. This would lower the cost of moving crude and refined products between US ports.

  

Prices

Oil futures surged to multiyear highs as markets reacted to the historic supply disruption, with demand destruction risks mounting.

• NYMEX April WTI climbed $8.48/barrel, or 9.7%, to settle at $95.73/b, and ICE May Brent ended the session up $8.48/b, or 9.2%, at $100.46/b.
• US medium-sour crude oil premiums surged on March 12 as Middle Eastern sour barrels remain trapped in the Persian Gulf, with Platts assessing Mars at a $5.05/b premium to WTI.
• Every 10% increase in global crude prices translates to around a 0.15% loss in GDP, the IEA said, warning of broader economic impacts from the supply shock.
• The IEA cut its projected global oil demand growth by 210,000 b/d to 640,000 b/d, reflecting current air traffic suspensions and a harsher macroeconomic outlook.
• Supply disruptions could put particular pressure on price-sensitive LPG markets, which rely on 1.5 million b/d of exports from the Persian Gulf, with India facing "particularly challenging" conditions.
• Over the full year 2026, the IEA still sees a global surplus of 2.4 million b/d, led by recovering Middle Eastern flows and rising output from producers outside the OPEC+ alliance.

Infrastructure

A number of refineries in the Middle East have either halted operations fully or reduced runs, including refineries in Saudi Arabia, UAE, Bahrain and Kuwait, according to Platts data.

• Global crude throughput will contract 3 million b/d in March to 79.7 million b/d, partly due to the collapse of runs in the Middle East and partly due to planned maintenance elsewhere, the IEA said.
• Refineries in Asia will face difficulties sustaining runs as they depend upon the "availability of continued crude supplies," with strong OECD utilization rates leaving little room for incremental processing elsewhere, the IEA said.
• According to IEA figures, half the world's oil storage is held in OECD inventories, with crude oil accounting for 75% of public stocks, providing some buffer against the supply shock.
• Iran's Revolutionary Guard Corps threatened to retaliate against regional oil and gas infrastructure if Iran's energy and port infrastructure is hit.
• The US military is not yet prepared to escort tankers through the Strait of Hormuz, Energy Secretary Chris Wright said March 12, with all military assets focused on destroying Iran's offensive capabilities.
• Wright said he expected the US Navy to be ready to begin escorts by the end of March, telling CNBC "this is an operation that will take weeks, not months."