US-Iran tensions trigger global energy market turmoil

PRICE hikes have hit the global oil and gas industry following escalating tensions between the US and Iran, with disruptions to critical trade networks causing widespread economic uncertainty.

Tankers and vessels passing through the Strait of Hormuz – which handles a fifth of the world’s LNG supply – are at a standstill after recent attacks in the region.

It has been confirmed that Iran had struck three US and UK oil tankers in the Gulf and Hormuz. Yesterday, Iran warned that the trade route is closed and threatened to set fire to any vessel attempting to pass through.

The Strait of Hormuz, is a narrow passageway between Iran and Oman, is vital not only for Middle Eastern oil and gas trade but also for neighbouring economies, including China, Japan, India and South Korea – which together accounted for 69% of all crude oil and condensate imports last year.

Price hikes

Fresh data from the Independent Commodity Intelligence Services (ICIS) shows Brent crude surged by more than 8% today, reaching US$82 per barrel.

European gas prices jumped from 25% and peaked at 50% yesterday due to the uncertainty over whether exports from Qatar could safely transit the Strait.

The chemical market has also been affected, particularly China’s methanol sector, with prices rising by more than 6%. Iran is the world’s second-largest methanol producer and China is its biggest importer.

Petrochemical turmoil

Early estimates from the ICIS paint a bleak picture for the future of global energy markets, projecting that further escalation could push Brent crude above US$100 per barrel – akin to price levels during the height of Russia’s invasion of Ukraine.

However, Oxford Economics offers a more optimistic scenario, suggesting the Strait will remain open despite Iran’s threats and that the recent oil and gas price spikes could be short-lived.