As the Israel-Iran conflict drags on and the U.S. launches strikes on Iran’s nuclear facilities, tensions in the Middle East continue to escalate, casting a heavy shadow over the outlook for global energy markets and shipping supply chains.
“The Artery of Global Energy Transport”
In early trading on Monday, international benchmark Brent crude rose more than 5% from last week’s close, climbing above $81 per barrel. It later gave up those gains, falling below $80. Since the outbreak of the current Israel-Iran conflict, global oil prices have surged nearly 10% in less than two weeks.
The Outbreak of War Has Sharply Increased the Risk Premium on Key Persian Gulf Export. In the refined oil sector, the Israel-Iran conflict has had a pronounced impact on diesel prices—particularly in Europe. Since June 12, the European ICE low-sulfur diesel benchmark has jumped nearly 15%, continuing a months-long upward trend driven by strong global demand and low inventories in both Europe and the U.S. The diesel price surge is especially significant for Europe. By mid-last week, the premium of European diesel futures over crude oil exceeded $20 per barrel. According to the International Energy Agency, diesel accounted for about 44% of Europe’s total oil product demand last year. It is widely used across the continent for private and commercial transport as well as industrial applications. In 2024, Europe imported over 1.2 million barrels of refined fuels per day, having previously cut off Russian diesel supplies and shifted its reliance to the Middle East and Asia.
The Middle East is a major global exporter of diesel, with exports reaching 831,000 barrels per day last year—about 17% of global seaborne diesel trade. In North America, diesel prices have also started to climb. Last week, analyst Dan McTeague told Canada’s CTV News that “conflict is breaking out in the Middle East while fuel inventories are far below normal levels,” causing diesel prices to rise nationwide in Canada—and in the U.S. as well. Global diesel prices are expected to follow suit.
As a key chokepoint in the global shipping supply chain, the Strait of Hormuz has now come under intense international scrutiny. Shell CEO Wael Sawan, speaking at last week’s Japan Energy Summit, called the strait “the artery of global energy transport.” “If that artery is blocked for any reason,” he warned, “the impact on global trade would be massive.” According to data from the U.S. Energy Information Administration, about 20 million barrels of crude oil passed through the Strait of Hormuz daily last year—roughly one-fifth of the world’s total liquid petroleum consumption.
Shipping Under Threat
Beyond rising oil prices, the conflict is straining international shipping routes and driving up operational costs for airlines. Fadel Buainain, a member of Saudi Arabia’s Shura Council, told Asharq Al-Awsat that the conflict has disrupted international air corridors and led to a spike in risk premiums, significantly raising insurance costs across the region. Maritime trade and shipping lanes now also face the direct risk of disruption.
In addition to the Strait of Hormuz, other key waters around the Arabian Peninsula—including the Gulf of Aden and the Red Sea—have become increasingly volatile due to the Israel-Iran conflict. Houthi forces may also launch new attacks.
According to a June 22 report by CNBC, Jakob Larsen, head of security at BIMCO—the world’s largest shipping association—stated that while it remains unclear how Iran will respond to U.S. strikes, commercial shipping around the Arabian Peninsula is clearly facing growing threats.
Larsen warned that Iran may attempt to escalate the disruption in the Strait of Hormuz by targeting commercial vessels. Analysts at U.S.-based Rapidan Energy Group estimate a 30% risk that Iran could retaliate by attacking Gulf infrastructure or ships in the strait, potentially causing more prolonged disruptions than markets currently expect—possibly halting shipping for weeks or even months. Meanwhile, the Houthi threat to shipping in the Red Sea and Gulf of Aden has also intensified.
With the security environment around the Arabian Peninsula growing increasingly tense, shipping costs are rising sharply. According to freight data provider Xeneta, as of last Friday, average spot container shipping rates had jumped 55% compared to the previous month. In tanker transport, freight rates for large crude carriers between the Middle East and Japan rose 148% by last Thursday, while rates for very large LNG carriers climbed 33%.
Global Eyes on Potential Conflict Escalation
Khaled Ramadan, director of the Cairo Center for Strategic Studies, told Asharq Al-Awsat that if the conflict continues, Israeli strikes on Iran’s energy infrastructure—such as the Abadan refinery, which has a daily capacity of 700,000 barrels—could significantly reduce oil and gas supplies. “If the Strait of Hormuz is closed, oil prices could skyrocket to record levels,” he warned. JPMorgan forecast in mid-June that a further escalation—disrupting either the Strait or critical oil infrastructure—could push oil prices up to $120–130 per barrel. Analyst Nikola Karras, analyzing data from 1987 to 2019, found that when WTI crude prices roughly double within a year, a global recession tends to follow in the next year.
Ramadan also noted that the conflict could disrupt global supply chains—especially those passing through the Strait of Hormuz—impacting not just energy but also electronics and food. Rising transportation and insurance costs would push up consumer prices and slow global trade.
The Nikkei Asian Review reported that nearly a quarter of crude oil shipped through the Strait of Hormuz goes to South Korea and Japan. Over 80% of the liquefied natural gas (LNG) passing through the strait is destined for Asian markets, primarily China, India, South Korea, and Japan. These high-income economies are heavily dependent on imports for both energy and food. Any supply chain disruption could drive up inflation in these countries. “This could flip their trade balances into deficits, weaken their currencies, and further fuel inflation,” the report warned, adding that “central banks may respond by pausing rate cuts or even hiking rates again.”
According to Reuters, after the U.S. strike on Iran’s nuclear facilities last Saturday, Iran’s parliament voted to support the closure of the Strait of Hormuz. However, the vote is nonbinding—the final decision lies with the Supreme National Security Council and Supreme Leader Ayatollah Ali Khamenei.
A report by ING released Monday noted that more than 80% of oil shipped through the Strait of Hormuz is bound for Asia, meaning any closure would have a major impact on the region. Yet Iran also relies on the strait for its own oil exports, particularly to Asia, and is unlikely to jeopardize those relationships. Based on that, ING assessed the near-term likelihood of Iran closing the strait as low. As of Monday during Asia-Pacific market hours, oil price volatility remained relatively contained—suggesting that markets, for now, do not expect a closure.
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