The Strait of Hormuz is almost effectively blocked, pushing the global energy market towards what could be the most severe energy crisis since the 1970s!
At the opening on Monday, oil prices surged directly.
WTI crude oil futures rose by as much as 22%, breaking through the $110 mark; Brent crude oil futures also jumped 20%, reaching $111.04 per barrel. The gains later receded somewhat.
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Meanwhile, due to the obstruction of oil exports and rapidly dwindling storage capacity, more and more major oil-producing countries in the Middle East are being forced to announce production cuts.
According to previous mentions by Wall Street Watch, the wave of production cuts in the Gulf region is spreading rapidly.
Kuwait has officially declared force majeure and significantly reduced production; the UAE has also begun to adjust offshore production levels to alleviate storage pressure.
Goldman Sachs has directly &#34;overturned&#34; its previous optimistic assessment, warning that: the actual flow decline in the Strait of Hormuz far exceeds expectations. If recovery is not achieved in the coming days, the upward risk for oil prices will significantly increase.
More critically, the intensity of this crisis has already far exceeded initial judgments from all parties.
At the onset of attacks by Israel and the United States, Gulf state officials generally believed that the situation would remain controllable and limited in escalation, similar to past conflicts.
However, this time, there is an unprecedented new variable —
Qatar has become the world's largest exporter of liquefied natural gas (LNG).
When its core facilities cease operations, it equates to nearly 20% of global LNG supply being suddenly cut off. The energy shock has thus rapidly spread from the oil market to the natural gas market.
The result is: natural gas prices in Europe and Asia have soared simultaneously.
Next, from Chinese chemical manufacturing to the Asian power industry, a series of chain reactions may be faced.
<h2>The Hormuz Crisis Exceeds Everyone's Expectations</h2>
The speed of the crisis escalation has caught the market off guard, largely due to initial misjudgments from all parties.
According to The Wall Street Journal, weeks before the attacks by Israel and the United States, officials from Gulf oil-producing countries were assured by the U.S. side that even in the event of retaliatory actions, the targets would only be U.S. military bases.
In other words, Iran would not attack the energy facilities of Gulf countries, nor would it attempt to block the Strait of Hormuz.
After all, during the 12-day bombing campaign by Israel and the United States against Iran last June, the Strait of Hormuz remained open.
Therefore, when the attacks actually occurred, most officials still held an optimistic attitude
According to reports, some officials even forwarded Mr. Bean giving the middle finger meme in chat groups, comparing Iran's possible retaliatory actions to this clumsy comedic character.
OPEC held a meeting on the first Sunday after the attack, focusing on whether to increase production, with almost no serious discussion about the situation in Iran.
Until the situation quickly spiraled out of control.
A senior Saudi official later admitted:
“We really did not expect Iran to take action against the entire Gulf, completely disregarding our relationship.”
Subsequently, a recording allegedly of an Iranian naval officer notifying ships not to enter the Strait of Hormuz quickly spread in industry WhatsApp groups.
The flow of tankers then plummeted, and market sentiment instantly turned to panic.
<h2>Tanks in Urgent Need, Production Cuts Spread</h2>
The Strait of Hormuz was almost completely blocked, quickly triggering a chain reaction among oil-producing countries in the Middle East.
The core reason is simple: oil storage space is nearly full.
Iraq was the first to be forced to cut production due to storage tanks nearing saturation, with a reduction of more than two-thirds.
Subsequently, Kuwait Oil Company officially declared force majeure.
According to Bloomberg citing informed sources, Kuwait's production cut scale has expanded from about 100,000 barrels per day on Saturday to nearly 300,000 barrels per day, with further adjustments to be made based on storage levels and the situation in the strait.
In January of this year, Kuwait's daily production was about 2.57 million barrels, and the only export route is the Strait of Hormuz. If the strait remains blocked, its storage space could be exhausted in a matter of weeks or even days.
Abu Dhabi National Oil Company (Adnoc) also announced on Saturday that it is “adjusting offshore production levels to meet storage demands.”
As the third-largest oil producer in OPEC, the UAE's daily production in January exceeded 3.5 million barrels.
Although Adnoc operates a pipeline to Fujairah Port with a daily delivery capacity of about 1.5 million barrels, which can bypass the Strait of Hormuz to maintain some exports, this route cannot fully replace the transportation capacity of the strait.
JP Morgan estimates that if the strait is not reopened by this Friday:
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The region's daily production decline could exceed 4 million barrels
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By the end of March, the decline could approach 9 million barrels
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This is equivalent to nearly one-tenth of global demand.
Saudi Arabia has already begun redirecting some crude oil exports to Yanbu Port along the Red Sea.
However, Goldman Sachs tracking data shows that in the past four days, the net redirected flow through pipelines and alternative ports has only increased by about 900,000 barrels per day, far below the theoretical maximum of 3.6 million barrels per day.
Additionally, attacks on storage facilities at Fujairah Port and shortages of marine fuel have further compressed alternative export capacity.
<h2>Qatar LNG Shutdown: A &#34;New Variable&#34; in the Crisis</h2>
Unlike any previous energy conflict in the Middle East:
Qatar has become the world's largest LNG exporter.
This dependency, formed over the past 20 years, has been magnified in this crisis
After the Iranian drone attack on Qatar's Ras Laffan Gas Complex, Qatar Energy announced on March 2nd the suspension of LNG production at the facility and declared force majeure.
Ras Laffan has an annual capacity of 77 million tons, accounting for about 20% of global LNG supply.
HSBC Global Investment Research pointed out that the facility's shutdown is not solely due to the blockade of the Strait.
Due to the inability to transport goods, the on-site tank capacity is only about 1 million tons, less than five days of normal loading capacity. In other words, Qatar Energy has no choice but to suspend production.
The market reaction was very direct.
European benchmark natural gas prices (TTF) surged about 70% over two trading days; Asian spot LNG prices (JKM) rose about 50%.
Both set new highs in nearly three years.
LNG tankers even staged a &#34; scramble for cargo&#34; on the high seas.
An LNG vessel named Clean Mistral suddenly turned 90 degrees towards Asia while en route to Spain, followed by several other vessels making similar adjustments.
What’s more troublesome is that restarting also takes time.
Reuters cited industry estimates stating:
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Restarting Ras Laffan itself requires about two weeks
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Returning to full production will take another two weeks
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HSBC estimates:
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A one-month shutdown will result in a loss of about 6.8 million tons of LNG
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A three-month shutdown will result in a loss of about 20.5 million tons
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Considering that Trump previously indicated that the war with Iran is expected to last four to five weeks, the mainstream market scenario assumes supply losses are approaching 8 million tons.
The problem is that the global LNG market has almost no spare production capacity.
Although the United States is the world's largest LNG exporter, the spare capacity is estimated to be only about 5%; Norway has stated that its natural gas production is already close to full capacity; Australia also has limited spare capacity.
<h2>Goldman Sachs &#34;tears up the report&#34;: Oil price upside risks rapidly expand</h2>
Goldman Sachs' commodity research team released a report on March 6th that almost openly overturned previous forecasts.
Goldman Sachs' chief oil strategist Daan Struyven had previously set the baseline scenario as:
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Flow through the Strait of Hormuz to maintain about 15% over the next 5 days
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Then recover to 70% over the next two weeks
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And recover to 100% in another two weeks
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Based on this assumption, Goldman Sachs raised its second-quarter average price forecast for Brent to $76 and for WTI to $71.
But reality quickly shattered these assumptions.
Goldman Sachs' latest estimate:
Flow through the Strait of Hormuz has already decreased by about 90%, which is a reduction of about 18 million barrels per day.
The actual redirected flow of alternative pipelines is only one-quarter of the theoretical maximum.
Meanwhile, most shipowners are now choosing to wait and see
What truly prevents ships from passing is not the freight cost, but physical security risks—as long as physical risks exist, ships will not pass, no matter how high the freight cost is.
Goldman Sachs stated in its report:
If there are no signs of a solution this week, oil prices are likely to exceed $100 next week.
If the Strait's traffic remains sluggish throughout March, oil prices (especially refined oil) may surpass the historical peaks of 2008 and 2022.
The report also emphasized:
The upward risk of oil prices is “rapidly expanding.”
Energy historian Daniel Yergin also warned:
“In terms of daily oil production, this is the largest supply disruption in global history. If it lasts for several weeks, it will have profound effects on the global economy.”
<h2>The U.S. is relatively insulated, but the impact is still spreading</h2>
U.S. Energy Secretary Chris Wright stated on Fox News on Sunday that energy “will soon flow back through” the Strait of Hormuz and believes that the rise in oil prices mainly stems from market concerns about the duration of the conflict.
Trump stated on Air Force One that he is not worried about gasoline prices and expects oil prices to “drop very quickly after the war ends.”
Compared to the 1970s, the U.S. energy structure is indeed more resilient today.
The oil and gas industry accounts for a smaller share of GDP, and the U.S. has become a major energy exporter.
But the problem is—
Oil prices are globally priced.
The rise in retail prices for gasoline and diesel will still have a real impact on U.S. consumers.
Airline executives have already warned that the surge in jet fuel prices will compress quarterly profits and may drive up ticket prices.
Meanwhile, some of the U.S. government's response measures conflict with existing policies.
To mitigate the impact of Gulf supply disruptions, the U.S. Treasury has relaxed some sanctions on Russian oil to allow countries like India to seek alternative supplies.
This is in stark contrast to previous policies aimed at isolating the Russian oil industry.
According to analyses from HSBC and Morgan Stanley, this energy shock presents distinctly different impacts in Eurasia.
For China's chemical industry, it is somewhat of an opportunity.
The surge in European natural gas prices has raised production costs for local chemical companies. HSBC Qianhai Securities pointed out that this will bring market share expansion and product premium space for Chinese chemical companies (in fields such as MDI, TDI, vitamins, etc.).
In Asia, however, the situation is more severe—
The market is facing a real energy supply shortage.
Morgan Stanley noted that the Asian power and gas industries rely on about 20% of Middle Eastern LNG, with India, Thailand, and the Philippines being particularly exposed.
To cope with fuel shortages and rising costs, some Asian countries have begun to turn back to coal power to maintain grid stability

LNGZ

The blockade of the Strait of Hormuz has triggered an unprecedented energy crisis, the level of escalation far exceeding previous expectations. This crisis is compounded by a new variable that has never appeared in history; with Qatar rising to become the world's largest liquefied natural gas exporter, the energy shock has spread from oil to the natural gas market. This not only caused natural gas prices in Europe and Asia to soar, but is also expected to trigger severe ripple effects from chemical manufacturing to the Asian power industry

- The Strait of Hormuz is almost effectively blocked, pushing global energy markets into a potential crisis akin to the 1970s.  
- Oil prices surged, with WTI crude futures rising over 22% while major Middle Eastern oil producers announced production cuts due to export disruptions and storage shortages.  
- The crisis intensifies as Qatar's LNG production halts, leading to soaring natural gas prices in Europe and Asia, which may further impact global energy supply and prices.

Finally, the Gulf Oil Crisis has arrived!