[Click eStock] "Middle East Conflict Escalation 'Oil Refining Industry' Weight Increase"

Shinhan Investment Corp. presented an "overweight" opinion on the refining industry on the 15th. As the Middle East conflict escalates due to Iran's attack on mainland Israel, international oil prices are rising, and refining industry stocks are likely to see further increases.

Lee Jin-myung, chief researcher at Shinhan Investment Corp., stated in a report on the same day, "Last year, Iran's crude oil production was 3.16 million b/d (barrels per day), accounting for about 4% of global production," adding, "Even if Israel launches retaliatory attacks against Iran and the conflict escalates, the impact on the global oil market is expected to be limited."

However, the researcher diagnosed, "Middle East risks act as an upward factor for oil prices, with the possibility of a blockade of the Strait of Hormuz underlying the situation." The Strait of Hormuz, located between Iran and Oman, is a key transportation route for major oil-producing countries in OPEC such as Saudi Arabia, Iraq, and the United Arab Emirates (UAE). He explained, "The oil volume passing through this strait is 20.8 million b/d, accounting for 28% of global maritime transportation and 21% of oil consumption," and expressed concern that "Iran could threaten to block the Strait of Hormuz, and if such a blockade is actually implemented, it could cause severe crude oil supply disruptions and a sharp rise in oil prices."

He advised, "Due to production cuts by OPEC and non-OPEC oil-producing countries and issues with Russian refining facilities, the crude oil supply remains tight," adding, "As Middle East risks intensify, upward pressure on international oil prices continues, so we maintain an 'overweight' opinion on the refining sector." Among domestic refining stocks, he recommended ‘S-Oil (S-Oil)’, which exclusively operates in refining, as the top pick.