Months of diplomacy collapsed into armed conflict Saturday morning when Israel and the US launched bombing missions against key sites in Tehran and several other Iranian cities. The strikes resulted in the death of Iran’s Supreme Leader, Ali Khamenei, and prompted retaliatory attacks by Iran on Israeli and US assets across multiple Middle Eastern states, including Qatar, the UAE and Bahrain.
Crude oil markets opened sharply higher at the start of the week as traders moved into long positions following the outbreak of hostilities. Market participants expressed serious concerns about crude oil and clean product flows through the Strait of Hormuz, now effectively closed to commercial traffic. Roughly 20% of global crude oil consumption transits the Strait, highlighting its strategic significance.
Tankers are rerouting around the Cape of Good Hope or halting transit, awaiting further instruction, as major shipping firms suspend travel through the Strait of Hormuz. Sources expect a marked slowdown in crude oil movement and sustained upward pressure on prices due to perceived supply shortages.
Market participants are closely watching for possible strikes on energy infrastructure, which could deepen the crisis. On Monday morning, traders reported a fire at a Saudi Arabian oil refinery, with two drones spotted nearby. While the fire is reportedly under control, sources warn this may be an early sign that refineries, ports and processing facilities could become target zones.
Written by Andrew Woods
