On 13 June, Israel launched an unprecedented wave of airstrikes on Iran, to which Tehran responded with hundreds of ballistic missiles fired at Israel. Panic ensued, reflected in prices, as benchmark Brent crude oil prices jumped 10% to over $77 a barrel by the start of the next week, amid a plethora of potential supply risks and uncertainty.
The GlobalData Oil & Gas Research team addresses the main concerns and calibrates the market’s potential overreaction to the Israel–Iran hostilities, looking to understand the Strait of Hormuz closure risk, the impact on Iran’s oil infrastructure, the collateral effects on Egypt and Jordan, Insurance premiums and proxy escalations
The likelihood of a complete closure of the Strait of Hormuz remains very low. Currently, around 30% of global seaborne oil trade and 20% of liquefied natural gas (LNG) shipments pass through this strategic chokepoint. Approximately 80% of oil and LNG exports from Gulf countries are shipped to Asian markets via the Strait, and all of Iran’s oil exports to China also rely on this route. For Iran, there is no practical incentive to block the Strait, as it is an economic lifeline for the country: about 80% of its imported goods transit through this passage. Any move to close it would therefore jeopardise Iran’s trade flows, as well as broader regional exports.
Most of Iran’s crude oil exports are shipped from Kharg Island in the Gulf. At present, the risk of a direct attack on the island appears limited, and even if targeted, such an action would likely be insufficient to halt Iran’s oil exports entirely, as the island hosts multiple export terminals. Moreover, Iran has alternative export routes, including other ports such as Bandar Abbas and Bandar Mahshahr.
The most notable alternative is the Jask pipeline, which bypasses the Strait of Hormuz and connects the western oil-producing regions to an export terminal on the Gulf of Oman. This pipeline was used to ship Iran’s first crude cargo via Jask in October 2024. However, its export capacity is significantly lower than Kharg’s terminals and does not support blended exports, so it could only serve to stabilise temporary disruptions and meet key deliveries. Iran’s exports, primarily headed to China, are controlled through unofficial channels, using ship-to-ship transfers and reflagging and are unlikely to be affected by further sanctions. In fact, the escalating US-China trade tension provides a solid offtake for Iran’s oil production.
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Source: Ministry of Petroleum in Iran.
Egypt and Jordan are among the countries most affected by the recent escalation between Israel and Iran. On 13 October, Israel ordered the operators of the “Leviathan” and “Karish” gas fields to halt production, disrupting gas supplies to both Egypt and Jordan. In response, both countries are taking emergency measures to prevent household power outages, including the temporary shutdown of industrial facilities connected to the national grid.
Egypt’s fertiliser plants have been particularly hard hit. Despite the resumption of gas flows to Egypt and Jordan on Thursday, the ongoing military tensions and the risk of attacks on gas platforms in the East Mediterranean may prompt Israel to halt production again.
War risk premiums have steadily been increasing globally, particularly in the Middle East. After the Israeli strikes on Iran, maritime war risk premiums saw an increase to 0.3% of vessel value, an increase of 60% from 0.125%. Further escalation, even cyber, could raise the cost of doing business throughout the Middle East. Though physical supply will remain intact, it has the possibility of driving prices upward as inflated delivered crude is supplied to Asia and Europe.
The recent surge in oil prices following the Israeli attacks last Friday was primarily driven by market panic over the risk of a broader conflict and potential disruptions to regional energy supplies. This price movement does not reflect any fundamental shift in underlying market conditions.
While a complete loss of Iranian oil exports remains unlikely, any supply gap could be offset relatively quickly. China currently holds elevated crude inventories, and OPEC members have the capacity and willingness to step in and increase output if needed to stabilise the market.
The recent escalation of hostilities between Israel and Iran has undeniably sent shockwaves through the global oil market, evidenced by the sharp rise in Brent crude prices. However, a closer examination reveals that the fundamental dynamics of oil supply and demand remain largely intact. The likelihood of a complete closure of the Strait of Hormuz is minimal, as such an action would be economically detrimental to Iran itself. Furthermore, Iran’s diverse export routes and the resilience of its oil infrastructure suggest that any disruptions to its exports may be manageable.
While neighbouring countries such as Egypt and Jordan face immediate challenges due to gas supply interruptions, the broader implications for the oil market appear to be more reflective of speculative panic than of actual supply constraints. As the situation evolves, it will be crucial for stakeholders to monitor developments closely, particularly regarding insurance premiums and potential geopolitical ramifications, while recognising that OPEC’s capacity to stabilise the market remains a significant mitigating factor against prolonged price volatility.
For a detailed analysis of energy developments, major disruptions and comprehensive data, stay tuned to GlobalData’s Oil & Gas Intelligence Center insights.
“Addressing oil market turmoil from Iran-Israel” was originally created and published by Offshore Technology, a GlobalData owned brand.
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