Oil prices rock the market! Houthi forces impose a "maritime blockade" on Saudi Arabia, Iran says Hormuz Strait shipping has dropped to zero, Iran-Kuwait desalination plant attacked

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The situation in the Middle East continues to escalate, with multiple energy and water supply lifelines under simultaneous pressure. Oil prices are undergoing severe fluctuations between geopolitical risks and expectations of a ceasefire.

According to CCTV News, on July 19, sources from the Iranian Islamic Revolutionary Guard Corps Navy stated that traffic through the Strait of Hormuz has dropped to zero, any attempt to cross the strait will be struck by Iran, and as long as the United States continues "hostile and provocative actions," the strait will remain closed.

Meanwhile, Xinhua International reports that Yemen's Houthi forces announced a maritime blockade against Saudi Arabia on July 20, and Saudi Arabia has previously exported large volumes of oil through the Red Sea pipeline. The dual blockade is placing double pressure on the global energy supply chain.

The impact of the conflict has spilled over into the Gulf region. A Kuwaiti power and desalination facility was attacked by Iran, causing severe damage; in Iran itself, about 10,000 residents lost water due to the destruction of a freshwater plant. Oil prices are fluctuating widely between news of geopolitical risks and expected ceasefire negotiations, with WTI crude closing at about $83 per barrel, and Brent crude rising in five of the past six trading days, hitting a six-week high.

Strait of Hormuz: Traffic Drops by More Than 80%

The Strait of Hormuz is the most important global channel for oil and liquefied natural gas transport, and the current situation has had a significant impact on actual shipping.

According to CCTV News citing Iranian IRGC Navy officials, there are currently no ships passing through the Strait of Hormuz, and Iran will not issue transit permits to any vessel. The source stressed that as long as the United States continues its provocative actions, the strait will remain closed.

Shipping tracker Hormuz Strait Monitor data shows that on July 20, the average daily number of ships crossing the strait was about 12, down more than 89% compared to the pre-war daily average of 110. Market analysis cited by ZeroHedge indicates that intensive attacks in recent days have reduced oil and LNG transport through the strait to a trickle.

Meanwhile, Iranian Foreign Ministry spokesman Esmail Baghaei said at a news conference that "the diplomatic mechanism has been active in recent days, and proposals from some mediators have been conveyed to the Islamic Republic of Iran,” suggesting there is some room for ceasefire negotiations. This statement briefly suppressed the rise in oil prices.

Destruction of Iran's Freshwater Plant, Ten Thousand People Without Water

The U.S.-Iran military conflict has directly damaged Iran’s civilian infrastructure.

According to a report from the Iranian government website cited by Xinhua News Agency on July 18, the United States continues to attack infrastructure in Iran's Hormozgan Province; the Bonji seawater desalination plant in the western part of Jask city was struck, resulting in a complete interruption of drinking water supply for about 10,000 residents.

Abdulhamid Hamzehpour, CEO of Hormozgan Province Water and Sewage Company, said that the seawater intake pumps and related power transformers of the Bonji desalination plant were completely destroyed, placing about 10,000 residents in 20 surrounding villages in a water crisis. He characterized the attack as "a series of criminal and terrorist attacks," and local workers are working to provide emergency water supplies and repair damaged facilities.

Meanwhile, the U.S. Central Command stated that it has launched attacks against Iran for the seventh consecutive night, with the latest wave of strikes targeting military logistics facilities, underground weapons depots, and maritime assets. Senior Iranian military official Mohsen Rezaee warned that if the U.S. continues to attack, Tehran will "abandon its restrained military posture."

Conflict Spillover, Kuwait’s Energy Facility Damaged

The impact of the U.S.-Iran conflict has spread to neighboring Gulf countries, with Kuwait bearing the brunt.

According to Xinhua, Kuwait’s Ministry of Electricity, Water, and Renewable Energy said on July 17 that a power and seawater desalination facility was attacked by Iran, causing severe damage to the facility and multiple power generation units. The attack triggered a fire in the plant, which has since been put under control by firefighters, and technicians are repairing the damaged units.

About 90% of Kuwait’s drinking water comes from seawater desalination, and this attack poses a direct threat to the country’s water supply security. Relevant Kuwaiti authorities stated that preventive measures are needed, including disconnecting some power units to protect the plant and workers' safety, ensuring grid stability, and urging residents to "use electricity and water wisely during this special period."

ZeroHedge cites Goldman Sachs analyst Rich Privorotsky as saying that Iran’s continued attacks on Kuwait’s power and desalination infrastructure are testing market expectations for the duration of this conflict.

Oil Price Fluctuations: Refined Product Risks May Exceed Crude Oil

Oil prices are caught between geopolitical risks and diplomatic expectations, with market sentiment highly sensitive.

WTI crude closed around $83 per barrel, with futures prices pushed higher during the session by news of Jordan intercepting an Iranian missile. Brent crude futures have risen in five of the last six trading days, hitting a six-week high and remaining in a backwardation structure reflecting tight supply.

Kelly Xu, commodities strategist at Oxford Economics, said, "The violent two-way swings in the market reflect uncertainty about the trajectory of the current situation—whether it will escalate further and prolong supply risks, or gradually ease and lower supply concerns." She added, "In the short term, the oil market is expected to remain highly sensitive to geopolitical headlines, with price movements mainly driven by new developments on the ground and changes in market expectations regarding regional tensions."

Goldman Sachs analyst Rich Privorotsky assessed that fundamentally, Iran will not relinquish control of the Strait of Hormuz, and the U.S. is unwilling to accept Iran’s stance. Gradual escalation may persist until oil prices rise enough to force the U.S. government back to the negotiating table. He believes this "reflexivity" is why the market has not yet panicked—there is an implicit upper limit to oil price upside because the U.S. government cares about market performance.

Notably, current crack spreads are at historical highs, and risks for refined oil products and natural gas may exceed those for crude oil itself. Heating oil and diesel prices are breaking out, and European natural gas prices are approaching post-conflict highs. Analysts note that Europe’s window to replenish inventories ahead of winter is narrowing.

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