In the wake of escalating tensions in the Middle East—particularly following the U.S. airstrikes on Iranian nuclear facilities on June 23, 2025—both the oil and natural gas markets are facing intense geopolitical pressure. While there have been no immediate disruptions to physical supply, the heightened risk in the region has led to a sharp increase in the risk premium, triggering volatile price movements and rising anxiety among market participants.
Following the U.S. strikes, Brent crude prices surged past $80 per barrel, before retreating to around $77. Although the underlying supply-demand fundamentals remain stable, current valuations reflect fears of possible disruptions to one of the world’s most critical energy routes: the Strait of Hormuz.
Iran currently produces approximately 3.3 million barrels of oil per day, with around 1.7 million barrels exported, despite ongoing international sanctions. A significant portion of this oil is shipped unofficially to China, circumventing formal trade records. This means Iran accounts for about 4% of global oil exports. Despite restrictions hampering Iran’s production growth, its export capacity has remained resilient. However, amid rising retaliation threats and the risk of broader military escalation, not only Iranian facilities but also regional transport infrastructure may be at risk.
The Strait of Hormuz: A Strategic Chokepoint
The Strait of Hormuz remains the most critical chokepoint for global oil and gas trade. Approximately 21 million barrels of oil and refined products pass through the narrow strait daily—one-fifth of the world’s oil supply. Additionally, it plays a vital role in the LNG market. More than 10 billion cubic feet of LNG transit the strait each day, 9 billion of which originate from Qatar, the world’s third-largest LNG exporter. Given that LNG now accounts for half of global gas trade, any blockade of Hormuz could immediately and severely impact global energy stability.
Against this backdrop, the recent 13% rise in European gas prices, reaching nearly €42/MWh on the TTF benchmark, though not directly linked to Iran, should be seen as a psychological response to perceived risk. The spike followed reports of an Israeli strike on the South Pars gas infrastructure—the world’s largest natural gas field, jointly operated by Iran and Qatar. While most of Iran’s gas is consumed domestically and has minimal direct impact on Europe, any disruption to Qatar’s LNG terminals or transport via Hormuz could significantly affect major importers like China, India, and indirectly the EU, which relies on Qatar for about 10% of its LNG imports.
A Domino Effect Across Global Markets
The current situation is triggering a domino effect in global energy markets. Regardless of where the initial shock occurs, its consequences can rapidly ripple across the entire system. Although OPEC+ holds substantial spare capacity—5.5 million barrels per day, according to the IEA—this is insufficient to fully offset a physical blockade of the Strait of Hormuz.
This limitation extends to LNG as well. Alternative pipelines from Saudi Arabia and the UAE offer combined capacity of only 2.6 million barrels per day, a mere 10% of Hormuz’s total flow.
As global tensions mount, the energy market stands on high alert, with every new development in the region capable of shifting the delicate balance of global supply and demand.
Author: Łukasz Zembik, OANDA TMS Brokers
Source: CEO.com.pl
