A widening supply shock propelled crude oil 35% higher in a week, pushing prices above $90 a barrel, as the Strait of Hormuz closed, drone strikes crippled Saudi oilfields, and a wave of force majeure declarations rippled through global energy markets.
This is the result of escalating tensions between the U.S and Iran.
Saudi Arabia’s Crown Assets Under Fire
Saudi Aramco’s Berri oilfield, which produces about 250,000 barrels per day, reportedly suffered minor debris damage on Saturday after Saudi defenses intercepted a drone attributed to Iran.
Earlier, Saudi Arabian air defenses intercepted 20 drones launched in five waves toward Shaybah Oilfield, a 1-million-barrel-per-day facility operated by Saudi Aramco in the Empty Quarter desert, the Saudi Defense Ministry said in a series of posts on X.
Separately, the ministry said Ras Tanura Refinery—a 550,000-barrel-per-day facility on the kingdom’s east coast—was targeted twice during the same week, on March 2 and March 4, according to an Argus report.
In Abu Dhabi, a drone struck the UAE’s Mussafah fuel terminal; authorities contained the fire with no injuries or operational disruption.
Hormuz Blockaded, Storage Filling Fast
According to a Reuters report, the Islamic Revolutionary Guard Corps confirmed on Monday that the Honduran-flagged tanker Athe Nova was hit by two drones while sailing in the Strait of Hormuz.
The Strait of Hormuz, which carries about 20% of the world’s daily oil supply, has effectively been closed, cutting off the main export route for major producers including Saudi Arabia, Iraq, Iran, and the UAE. The disruption has intensified concerns over a global supply shortage.
Tanker traffic through the strait has fallen from about 60 vessels a day to nearly zero.
Kuwait has begun cutting production at several oilfields as onshore storage nears capacity. Data provider Kpler warned that Kuwait may need deeper cuts within 12 days.
Saudi Arabia and the UAE face similar storage saturation within three weeks.
Iraq has reduced total output by over half, including 700,000 bpd from BP plc‘s (NYSE:BP) Rumaila field alone.
Force Majeure Cascade Widens
QatarEnergy declared force majeure on all LNG contracts after halting production.
According to Al Jazeera, Israel’s Leviathan and Tamar gasfields shut as a precaution.
India’s state-run Mangalore Refinery and Petrochemicals Ltd. (NSE: MRPL) declared force majeure on gasoline exports, Reuters reported.
Iraqi Kurdish producers DNO, Gulf Keystone and Dana Gas also halted output.
Washington granted Indian refiners a 30-day sanctions waiver to source Russian crude as a substitute — a reversal from prior tariff threats — lifting prices for Russian cargoes.
Market Implications
JPMorgan Chase & Co. (NYSE:JPM) warned the blockade of the strait could slash Iraq and Kuwait’s combined output by 4.7 million bpd by day 18.
The United States Oil Fund LP (NYSE:USO), which tracks front-month WTI futures and offers investors a liquid way to make directional bets on crude without trading futures directly, jumped 12.94% on Friday.
Meanwhile, Invesco DB Oil Fund (NYSE:DBO), which aims to track changes—both positive and negative—in the DBIQ Optimum Yield Crude Oil Index Excess Return, gained 8.24% on the same day.
Photo courtesy: Fun Fun Photo via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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