Global Oil Markets Volatile as Iran Conflict Disrupts Shipping Routes

Global oil prices saw a significant increase in July, with Brent crude rising 22.93 percent and WTI rising 20.34 percent for the month. This surge follows a period of instability triggered by a war involving Iran that began on February 28. The conflict has severely disrupted the Strait of Hormuz, a vital chokepoint that previously handled about one fifth of global oil and gas supplies. Iran has largely blocked maritime traffic through the strait, while Houthi forces in Yemen have threatened vessels in the Bab el Mandeb strait, further risking alternative export routes used by Saudi Arabia and other regional producers.

Major energy companies, including Exxon and Chevron, have warned that fuel prices will remain high due to the ongoing war. The economic impact extends beyond raw crude to petrochemical products and energy costs. In Switzerland, the company Clariant reported a 13 percent drop in catalyst sales during the second quarter because customers lacked the raw materials needed for production. Similarly, the agricultural sector has been strained by the rising costs of diesel and synthetic fertilizers. In Pakistan, the government has shifted to daily fuel price revisions to manage international market fluctuations, although the country has faced record increases in the price of regasified liquefied natural gas because shipments from Qatar were unavailable due to the US Iran war.

Market analysts note that while the world is relying on US crude and derivatives to balance the shortage, US stockpiles are decreasing at an accelerated rate. Some analysts suggest the market is shifting from trading based on the war itself to trading based on actual shipping data.