[US-Iran Airstrike] Middle East War Puts Oil Prices on Edge: "Fate Hinges on Strait of Hormuz Blockade"

On February 28, following attacks by Israel and the United States on Iran that triggered war in the Middle East, vessel traffic through the Strait of Hormuz-an essential chokepoint for global oil transit-plummeted. Some analysts have suggested that if the strait were to be blocked, international oil prices could surpass $100 per barrel (approximately 145,850 won).

The Strait of Hormuz is a strategic hub in the Middle East and a major global oil transport route, located at the entrance to the Persian Gulf. Approximately one-fifth of the world's oil and liquefied natural gas (LNG) consumption passes through this strait for transportation.

According to the U.S. Energy Information Administration (EIA), as of 2024, 84% of the oil and condensate (ultralight oil and volatile liquid hydrocarbons produced as a byproduct during natural gas extraction) transported through the strait and 83% of the LNG were shipped to Asian countries, with the main destinations being China, India, Japan, and Korea.

In the two days following the outbreak of war, vessel traffic through the Strait of Hormuz sharply declined. According to the U.S. daily The New York Times (NYT), on February 27-the day before the war commenced-65 oil tankers carrying energy commodities passed through the strait, but by March 1, only 6 had crossed by the afternoon.

The UK-based Financial Times (FT) explained that, despite the onset of a trade war following Donald Trump's return to the U.S. presidency, attacks on institutional bodies such as the Federal Reserve, and threats to allied nations over the Greenland issue, global economic growth has remained steady. However, with the current war, the direction of the global economy-whether growth will persist or falter-now hinges on developments in the oil market.

The key issue is whether the United States and its allies can prevent a prolonged blockade of energy shipments through the Strait of Hormuz.

According to NYT, international oil prices (based on Brent crude futures) have risen more than 20% since the beginning of this year amid escalating tensions between the United States and Iran, exceeding $70 per barrel last week and approaching $73 per barrel, the highest in the past seven months. At around 1:00 a.m. (local time) on March 2, just one hour after the market opened, prices climbed more than 6% from the previous closing price on February 27, nearing $77. In pre-market trading on March 1, prices at one point surged more than 10%, reaching close to $80 per barrel.

Edward Fishman, Senior Fellow at the Council on Foreign Relations (CFR), stated, "The Strait of Hormuz is the most important maritime chokepoint in the world," and warned, "If there is a significant and sustained disruption to all shipments through the strait, it will send a massive shock to global oil prices." He added, "In that scenario, international crude prices could exceed $100 per barrel."

If this occurs, the LNG market would also be affected, leading to increased inflationary pressures in key demand markets such as Europe. According to Capital Economics, if Brent crude oil rises to $100 per barrel, it could raise global inflation by 0.6 to 0.7 percentage points.

Fishman noted, "A scenario that is more likely and would cause less damage is one where Iran's oil sales are halted without a full blockade of the Strait of Hormuz." If this scenario materializes, oil prices are expected to rise to at least $80 per barrel.

If oil-producing countries other than Iran increase their output, the impact on oil prices could be more limited. The major oil producers' organization, OPEC+, announced on March 1 that it had decided to increase production by 206,000 barrels in April 2024 to stabilize the oil market.

While countries like China have a high dependency on Iranian oil, Iran's share of global supply is not significant in overall terms. As of January this year, Iran's oil production stood at 3.45 million barrels per day, accounting for less than 3% of global supply.

Amy Myers Jaffe, a research professor at New York University, told NYT, "The biggest question is whether oil facilities will be damaged and, if so, which facilities will be affected." She added, "If the answer is that no facilities are damaged, then in my view, oil prices will come back down."

As of late at night on March 1, local Iran time, there were no reports of attacks on major energy facilities in the Middle East region.

This content was produced with the assistance of AI translation services.