Smoke billows from Saudi Aramco's Ras Tanura oil refinery after a reported Iranian drone strike
Middle East oil vulnerabilities have been exposed
The killing of Iran’s Supreme Leader Ayatollah Khamenei in US–Israeli strikes marks the most serious escalation in the region in decades and a bigger potential threat to the oil market than the start of the Russia-Ukraine crisis
The current Middle East conflict is an unprecedented structural market shock that could reshape the region’s energy and political relations indefinitely. The oil price risk premium of around $15/bl reflects a calculation that considers a relatively quick resolution on that transformative journey and one that could well end up as a net positive for the oil sector. But the level of disruption before that point could spiral out of control. Indeed, the oil market has entered a new phase in which supply security rather than spare capacity or production muscle has the greatest importance. Producing more barrels is futile if they cannot be shipped. OPEC+ has agreed to raise output by 206,000b/d, ef
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For GCC producers, the ceasefire may prove more destabilising than the war itself: exports remain constrained, and control over Hormuz has shifted in ways that could endure
