Oil prices jump on Middle East war risk, energy attacks

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The conflict with Iran entered a new, dangerous chapter after US attacks that began Feb. 28, and the global oil market is bracing for impact.

Iran itself is an oil powerhouse, producing some 3.2 million b/d of crude and able to refine up to 2.2 million b/d. But it also has the power to wreak havoc on critical trade lanes beyond its borders.

Unlike the 12-day war that took place last June, this time Iran’s military response was immediate and far-reaching – striking ports, naval bases, and tankers with hundreds of drones that hit Israel, Bahrain, Kuwait, Qatar, the UAE and Jordan.

Ras Tanura – the largest refinery in Saudi Arabia – has also been targeted, along with the world’s largest LNG plant in Qatar.

To enter the Persian Gulf – home to a fifth of the world’s oil trade –  ships have to navigate a 20-mile waterway between Iran and Oman, which cleared out over the weekend, and insurers have scrambled to hike premiums or even cancel policies.

Already at seven-month highs before the attacks, oil prices jumped 10% at the market open on March 1, far from what traders were pricing just weeks before on warnings of a global “superglut.” 

In products, ICE gasoil futures were up by 17%.

Permanently halting shipping into the Persian Gulf would be an unprecedented move by Iran that would hurt its main trade partner, China. 

And we’ve so far seen caution from OPEC+, the US and IEA before rushing to signal major supply injections with spare production or strategic reserves.

But attacks on critical oilfields could change that risk calculus, and with its supreme leader gone it’s impossible to tell how Iran emerges from this crisis. 

Follow our coverage at S&P Global Energy Core as we bring you the latest.