Middle East Conflict Paralyzes Oil Trade
Escalating conflict in the Middle East led to attacks on commercial vessels off Iraq's coast, reportedly by Iranian drone boats and sea mines. Iraq suspended oil terminal operations, and Oman evacuated tankers, paralyzing regional oil trade. The Pentagon reported the first six days of the war cost the U.S. $11.3 billion.
The Iraqi oil ministry confirmed the shutdown of export terminals on March 12 after the attacks, with no timeline provided for resumption. Tanker rates in the Persian Gulf immediately jumped 30% due to increased insurance costs and rerouting. Lloyd's of London raised its war risk insurance premiums for the Persian Gulf region by 0.5% of the hull value, adding approximately $200,000 in costs for a standard very large crude carrier (VLCC). Several major shipping companies, including Maersk and Hapag-Lloyd, announced temporary suspensions of operations in the affected areas. Analysts at Goldman Sachs estimate the disruption could remove 2-4 million barrels of oil per day from global markets, potentially pushing Brent crude prices above $120 per barrel. The U.S. Energy Information Administration (EIA) is expected to release an updated short-term energy outlook next week, factoring in the Middle East crisis.
