Oil prices rose sharply as market trading began on Sunday, as US and Israeli attacks on Iran and retaliatory strikes on Israel and US military facilities around the Gulf caused disruptions to the global energy supply chain.
Traders were betting that oil supplies from Iran and other parts of the Middle East would slow or stop. Attacks across the region, including two ships traveling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, could restrict countries’ ability to export oil to the rest of the world.
According to energy experts, this would likely result in higher prices for crude oil and gasoline. West Texas Intermediate, the light, sweet crude produced in the United States, was selling for about $72 a barrel late Sunday, about 8 percent higher than its trading price of about $67 on Friday.
About 15 million barrels of crude oil per day – about 20 percent of the world’s oil – are shipped through the Strait of Hormuz, making it the world’s most critical oil choke point, according to Rystad Energy.
Tankers traveling through the strait, which borders Iran to the north, carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran.
Story continues below this ad.
Iran had temporarily closed parts of the strait in mid-February for what it said was a military exercise.
Further disruptions to that shipping channel could lead to lower supply and higher oil prices.
Attacks across the region, including two ships traveling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, could restrict countries’ ability to export oil to the rest of the world.
That would likely result in higher prices for crude oil and gasoline, according to energy experts. In this context, eight countries that are part of the OPEC+ oil cartel announced that they would increase crude oil production on Sunday.
Story continues below this ad.
The Organization of the Petroleum Exporting Countries, at a meeting scheduled before the war began, said it would increase production by 206,000 barrels a day in April, more than analysts expected.
Countries boosting production include Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
“Roughly one-fifth of the world’s oil supply passes through the Strait of Hormuz, a vital artery for global trade, meaning markets are more concerned about whether barrels can move than about excess capacity on paper,” Jorge León, senior vice president and head of geopolitical analysis at Rystad, said in an email.
“If flows through the Gulf are limited, additional production will provide limited immediate relief, making access to export routes much more important than primary production targets.”
Story continues below this ad.
Iran exports about 1.6 million barrels of oil a day, mainly to China, which may need to look elsewhere for supply if Iranian exports are disrupted, another factor that could drive up energy prices.
