Oil prices climb as Iran conflict disrupts shipping and fuels supply fears
(WO) - Oil markets continued to strengthen as the escalating U.S.–Iran conflict raises concerns about tanker security and supply disruptions in the Persian Gulf, analysts at Marex said.
Sasha Foss, energy analyst at CSC Commodities, a division of Marex, said traders are increasingly focused on risks to shipping through the Strait of Hormuz, the chokepoint that handles roughly one-fifth of global oil flows, and around 20% of global LNG supply. “Oil futures prices continue to rise as the U.S.–Iran conflict escalates and expands across the region,” Foss said, noting that markets are drawing comparisons to the “tanker war” of the 1980s during the Iran–Iraq conflict. Six tankers have reportedly been struck in the Gulf since hostilities began on Feb. 28. Front-month Brent crude traded near $82.40/b in mid-morning London trading, up about $1/b on the day, though reports of Iranian outreach to Washington to de-escalate tensions have capped further gains.
The Trump administration has indicated it may deploy naval escorts and provide risk insurance to protect vessels transiting the Strait of Hormuz. Foss said the proposal—under which the U.S. Development Finance Corporation would provide political risk insurance while naval forces escort tankers—could help reopen the key shipping corridor. However, details remain limited, and market participants question how quickly such measures could be implemented. U.S. law also limits Navy escorts to American-flagged vessels.
Higher prices could benefit U.S. shale producers as buyers in Europe and Asia seek alternative supplies, Foss noted. However, operators have warned that replacing Middle Eastern exports would take time. Producers have spent the past year cutting costs, and prime drilling locations are increasingly limited, making a rapid production increase unlikely—particularly if the conflict proves short-lived and prices retreat.
See also: Qatar shuts Ras Laffan LNG plant after Iranian drone strike
The disruption could also reshape global trade flows. Foss said Iran typically exports most of its crude to Chinese independent refiners, meaning Russia could increase shipments to China if Iranian exports remain constrained. Meanwhile, Europe’s dependence on Middle Eastern refined products—especially diesel—has grown following sanctions on Russian supplies. Damage to regional infrastructure, including Saudi Arabia’s Ras Tanura refinery, has pushed gasoil futures above $1,000/mt, with additional imports from the U.S. Gulf Coast likely.
Natural gas markets have also been volatile. Ben Samuel, energy markets analyst at Marex, said UK gas prices dropped about 10% after the U.S. and France signaled plans to escort energy tankers through the region, though prices remain sharply elevated overall. Second-quarter UK gas contracts are still roughly 50% higher than levels seen at the end of last week.
