Finally, the Gulf oil crisis has arrived!
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The Strait of Hormuz is almost effectively blockaded, pushing the global energy market toward what could be the most severe energy crisis since the 1970s!
On Monday’s opening, oil prices surged directly.
WTI crude oil futures rose as much as 22%, breaking through the $110 mark; Brent crude oil futures also jumped 20%, reaching $111.04 per barrel. The gains then slightly retreated.
At the same time, as crude oil exports are blocked and storage space rapidly runs out, more and more major oil-producing countries in the Middle East are forced to announce production cuts.
According to earlier reports from WallstreetCN, the wave of production cuts across the Gulf region is spreading rapidly.
Kuwait has officially declared force majeure and sharply cut production; the UAE has also begun adjusting offshore production levels to ease storage pressure.
Goldman Sachs has directly "overturned" its previous optimistic outlook, warning: The actual flow decline in the Strait of Hormuz far exceeds expectations. If it cannot be restored in the next few days, the upward risk for oil prices will expand significantly.
More critically, the intensity of this crisis has already surpassed all initial judgments.
At the beginning of the Israeli and US attacks, Gulf officials generally believed the situation would remain controllable with limited escalation, as in previous conflicts.
But this time, a new variable never seen in history has emerged—
Qatar has become the world’s largest exporter of liquefied natural gas.
When its core facilities are shut down, nearly 20% of the global LNG supply is suddenly cut off. The energy shock thus spreads from the oil market rapidly to the natural gas market.
The result: European and Asian natural gas prices are soaring in tandem.
Next, from Chinese chemical manufacturing to the Asian power industry, a series of chain reactions may follow.
The Hormuz crisis exceeds everyone’s expectations
The speed of crisis escalation caught the market off guard—largely due to an initial misjudgment by all parties.
According to the Wall Street Journal, in the weeks before the Israeli and US attacks, Gulf oil-producing country officials had received assurances from the US: even in case of retaliation, the targets would only be US military bases.
In other words, Iran would not attack Gulf countries’ energy facilities, nor try to blockade the Strait of Hormuz.
After all, during Israel and the US' twelve-day bombing of Iran last June, the Strait of Hormuz remained open throughout.
Thus, when the attack actually happened, most officials remained optimistic.
Reports say some officials even shared Mr. Bean giving the middle finger memes in chat groups, comparing Iran’s potential retaliation to this clumsy comic character.
OPEC held a meeting the first Sunday after the attack, focusing on whether to increase production, and barely discussed the Iran situation seriously.
Until the situation rapidly spun out of control.
A senior Saudi official later admitted:
“We truly did not expect Iran would strike the entire Gulf, completely disregard its relationship with us.”
Soon after, an alleged recording of Iranian naval officers notifying ships by radio to not enter the Strait of Hormuz spread quickly in industry WhatsApp groups.
Tanker traffic plummeted almost immediately, and market sentiment shifted abruptly to panic.
Storage tanks in crisis, production cuts spreading
The effective blockade of the Strait of Hormuz quickly triggered a chain reaction among Middle Eastern oil-producing nations.
The core reason is simple: oil storage space is almost full.
Iraq was the first, forced to cut output by more than two-thirds as oil tanks neared saturation.
Then Kuwait Petroleum Corporation officially declared force majeure.
Bloomberg, citing insiders, reported Kuwait's production cuts rose from about 100,000 barrels/day on Saturday to nearly 300,000 barrels/day, and will continue adjusting based on storage levels and the status of the strait.
This January, Kuwait output was about 2.57 million barrels/day, and the only export route is the Strait of Hormuz. If the strait remains blocked, storage capacity could be exhausted within weeks or even days.
Abu Dhabi National Oil Company (Adnoc) also announced Saturday that it is “adjusting offshore production levels to meet storage needs”.
As OPEC’s third largest oil producer, the UAE produced over 3.5 million barrels/day in January.
Although Adnoc operates a pipeline to Fujairah port with a daily capacity of about 1.5 million barrels, bypassing the Strait of Hormuz to maintain some exports, it cannot fully replace the strait’s transport capacity.
JP Morgan estimates if the strait is not reopened by Friday:
- The region’s daily output could fall by more than 4 million barrels
- By the end of March, the drop could reach 9 million barrels
This is nearly one-tenth of global demand.
Saudi Arabia has already started diverting some crude exports to Yanbu port along the Red Sea.
But Goldman Sachs tracking data show that net redirected flow through pipelines and alternative ports has increased only about 900,000 barrels/day over the last four days, far below the theoretical limit of 3.6 million barrels/day.
Additionally, attacks on Fujairah port storage facilities and a shortage of marine fuel have further squeezed alternative export capacity.
Qatar LNG shutdown: the crisis’s “new variable”
Unlike any previous Middle East energy conflict:
Qatar has become the world’s largest LNG exporter.
The dependency built up over the past 20 years is fully amplified in this crisis.
After Iran’s drone attack on Qatar’s Ras Laffan natural gas complex, QatarEnergy announced on March 2 it was halting LNG production at the facility and declared force majeure.
Ras Laffan’s annual capacity is 77 million tons, about 20% of global LNG supply.
HSBC Global Investment Research pointed out the facility shutdown is not solely due to the strait’s blockade.
Because shipments cannot leave, onsite tank capacity is only about 1 million tons, less than five days’ normal loading volume. In other words, QatarEnergy really has no choice but to shut down.
The market reaction was immediate.
European benchmark gas prices (TTF) surged about 70% over two trading days; Asian spot LNG prices (JKM) rose about 50%.
Both hit three-year highs.
LNG tankers even had a “cargo grab battle” on the high seas.
An LNG vessel named Clean Mistral suddenly turned 90 degrees toward Asia while en route to Spain, followed by several other vessels making similar adjustments.
More troublesome, restarting will take time.
Reuters, quoting industry estimates:
- Ras Laffan restart takes about two weeks
- Full capacity recovery takes another two weeks
HSBC calculations:
- One month shutdown loses about 6.8 million tons of LNG
- Three months loses about 20.5 million tons
Considering Trump previously estimated the Iran war would last four to five weeks, mainstream market scenario assumptions put supply losses close to 8 million tons.
The problem: there is virtually no spare capacity in the global LNG market.
Although the US is the world’s largest LNG exporter, only about 5% spare capacity is estimated; Norway says its gas production is near full load; Australia has limited spare capacity too.
Goldman “tears up reports”: oil price upside risk rapidly expands
Goldman’s commodities research team, in their March 6 report, almost publicly overturned previous forecasts.
Goldman’s chief oil strategist Daan Struyven had set the baseline path:
- Strait of Hormuz flow remains about 15% in the next 5 days
- Recovers to 70% in the following two weeks
- Then back to 100% two weeks later
Based on this, Goldman raised Brent Q2 average price forecast to $76, WTI to $71.
But reality quickly punched through these assumptions.
Goldman’s latest estimate:
Strait of Hormuz flow has fallen about 90%, a reduction of about 18 million barrels/day.
Actual flow redirected through alternative pipelines is just one-quarter of the theoretical maximum.
Meanwhile, most shipowners now choose to wait and see.
The real deterrent isn’t freight rates but physical security risks—as long as these risks exist, however high the freight, ships won’t transit.
Goldman’s report points out:
If there’s no sign of resolution this week, oil prices are likely to break $100 next week.
If strait flow stays low throughout March, oil prices (especially refined products) could exceed the historical peaks of 2008 and 2022.
The report emphasizes:
The upside risk for oil prices is "rapidly expanding".
Energy historian Daniel Yergin also warned:
“In terms of daily oil output, this is the largest supply disruption in global history. If it lasts several weeks, it will profoundly affect the global economy.”
The US relatively insulated, but the shock is spreading
US Energy Secretary Chris Wright said on Fox News Sunday that energy will “soon flow again” through the Strait of Hormuz, viewing the oil price jump as largely driven by concerns over conflict duration.
Trump meanwhile said aboard Air Force One he is not worried about gasoline prices and expects oil prices to “fall back very quickly” after the war ends.
Compared to the 1970s, the US energy structure is indeed more resilient now.
Oil and gas make up a smaller share of GDP, and the US itself is a major energy exporter.
But the problem is—
Oil prices are set globally.
Rises in gasoline and diesel retail prices will still have a real impact on US consumers.
Airline executives have already warned that jet fuel prices surging will squeeze quarterly profits and may push up ticket prices.
Meanwhile, some US government response measures conflict with existing policies.
To ease supply disruptions from the Gulf, the US Treasury has loosened some sanctions on Russian crude, so countries like India could seek alternative supplies.
This clearly contradicts previous policies to isolate Russia’s oil industry.
According to HSBC and Morgan Stanley analysis, this energy shock presents sharply different impacts in Europe and Asia.
For China’s chemical industry, in some ways it is an opportunity.
European gas price surges have raised local chemical companies’ production costs. HSBC Qianhai Securities point out this will offer market share expansion and product premium space for Chinese chemical firms (like MDI, TDI, vitamins).
But in Asia, the problem is more severe—
The market faces a real energy supply shortage.
Morgan Stanley notes about 20% of Asian power and gas industries depend on Middle Eastern LNG, with India, Thailand and the Philippines especially exposed.
To handle fuel shortages and rising costs, some Asian countries have already begun switching back to coal power to stabilize their grids.
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