By Ron Bousso
LONDON (Reuters) – Global energy markets are facing a serious disruption as U.S. and Israeli military strikes on Iran, followed by Iran's missile attacks, threaten oil exports from a region that is crucial for the world’s oil supply.
The impact of this disruption will depend on how long the conflict lasts, but the current uncertainty is already affecting oil flows from an area that supplies about 20% of global oil.
If a quick resolution is not reached, we can expect oil prices to rise significantly when trading starts on Monday. Recently, Brent crude oil prices have increased to around $70 a barrel, the highest level since August 2025, as investors prepare for potential military conflict in the Middle East.
Last Saturday, the U.S. and Israel launched military strikes against Iran, targeting high-ranking officials and escalating tensions in the region. U.S. President Donald Trump stated that these actions would reduce threats to the U.S. and give the Iranian people a chance to change their leadership.
Currently, there are no confirmed reports of damage to oil and gas facilities due to Iranian retaliatory strikes.
Explosions were reported in the United Arab Emirates and Kuwait, both significant oil exporters. Qatar, the second-largest exporter of liquefied natural gas, stated that it intercepted missiles aimed at its territory.
Reports of blasts also came from Bahrain and near Iran's Kharg Island, through which about 90% of Iran's crude oil exports typically pass. However, shipping data indicates that Iran has recently loaded most of its oil from this terminal onto tankers.
Importantly, there have been no reports of disruptions in shipping traffic through the Strait of Hormuz, the narrow passage that handles nearly 20 million barrels of crude oil and refined products daily.
However, the lack of physical damage doesn't lessen concerns.
The fear that tankers could become trapped in the Gulf or be targeted is already leading producers and shippers to rethink their operations. Reports indicate that some oil companies and trading firms have suspended shipments through the strait for several days.
That level of caution is unlikely to change until there is more confidence about the safety of shipping routes in the area.
Shipping rates for oil tankers, which have already been rising due to growing tensions, are expected to increase further. Rates for very large crude carriers traveling from the Middle East to China have more than tripled since the beginning of the year, reflecting higher risks and a dwindling number of available vessels.
Key questions now include whether energy infrastructure will be directly attacked and how quickly the U.S. military can secure shipping routes across the Gulf and the Strait of Hormuz.
It is important to note that the Strait of Hormuz has never been fully blocked.
While Iran may not sustain a long-term blockade, it has the ability to disrupt traffic temporarily. The U.S. Navy would likely respond quickly, but even short-term attacks could significantly affect oil prices and supply.
Such actions are not without precedent. During the Iran-Iraq war in the 1980s, Iran targeted commercial shipping, leading President Ronald Reagan to send U.S. forces to escort tankers in an operation named Earnest Will. Similarly, there were numerous confrontations between Iranian and U.S. naval forces in late 2007 and early 2008. More recently, in April 2023, Iran seized the Advantage Sweet crude tanker, which was chartered by Chevron, in the Gulf of Oman, only releasing it over a year later.
Currently, the global oil market is relatively well-stocked, given that production from the U.S., Brazil, Canada, and other countries has increased in recent years.
Saudi Arabia, the largest oil exporter in the world, has also been proactive amid supply risks. The kingdom raised crude shipments recently, expected to exceed 7 million barrels per day in February, the highest level since April 2023, according to shipping data from Kpler.
OPEC+, which includes OPEC member countries and allies like Russia, is likely to agree on an increase in output during a meeting scheduled for Sunday.
However, disruptions to export routes from the Middle East could undermine much of the production increases from the region, even though Saudi Arabia and the UAE have alternative export routes available.
The extent of the U.S. and Israeli strikes, along with Trump’s remarks, indicates that Washington is preparing for a long-term military effort aimed at significantly weakening Iran’s government.
How threatened the Iranian leadership feels could influence its decisions about escalating attacks on various targets in the region, including oil fields, export terminals, and processing facilities.
Even without the worst-case scenario unfolding, the ongoing conflict is already poised to disrupt essential energy supplies from the Middle East in ways not seen in decades.