Energy War Escalates, but Tehran Quietly Courts Neighbors

Oil markets are increasingly pricing in a potential long-term disruption as the situation in the Strait of Hormuz chokes exports, overwhelms limited bypass capacity, and exposes Gulf supply routes to escalating attacks. Crude Awakening: When $200 Oil Starts to Sound Reasonable - Oil markets are warming up to the idea that crude could indeed reach $200 per barrel, a threat that Tehran’s military keeps on reiterating, after the closure of the Strait of Hormuz entered its third week. - Most of crude tankers passing through the Hormuz remain of Iranian origin, with so far only 5 non-Iranian tankers breaking through the IRGC’s blockade – three en route to India, two to Pakistan. - There are only two bypassing routes from Gulf countries that avoid the Strait of Hormuz, namely Saudi Arabia’s 5 million b/day East-West pipeline and the UAE’s 1.5 million b/day Habshan-Fujairah conduit. - Whilst Saudi Aramco has sped up its loadings from its Red Sea coast to 3 million b/day, a level never seen before but still well below its 7 million b/day export rate before the war - however, one single Houthi strike could disrupt those flows even further. - The UAE’s main evacuation route might see further disruptions, too, as Iran struck the Fujairah export terminal twice in just two days, forcing national oil company ADNOC to suspend loadings. Market Movers - Italy’s oil major ENI (BIT:ENI) has made two new gas discoveries offshore Libya, jointly containing more than 1 trillion cubic feet of gas, hitting commercial deposits of gas with its Bahr Essalam-2 and Bahr Essalam-3 wildcats. - Japan’s leading shipping company Nippon Yusen KK (TYO:9101) has agreed to buy 50% in Avenir LNG, one of the pioneers of LNG bunkering operations. - Brazil’s state oil firm Petrobras (NYSE:PBR) said it had decided to exercise its pre-emptive right to purchase the 50% stake of Malaysia’s Petronas in two offshore fields in Brazil for a total of $450 million. - UK oil major BP (NYSE:BP) has started production from its Quiluma field offshore Angola it jointly develops with ENI, aiming to initially produce 150 MMCf/day, to be gradually ramped up to 330 MMCf/day by the end of 2026. Tuesday, March 17, 2026 Iran’s attacks on energy infrastructure in Gulf countries, particularly targeting the oil terminals and gas fields of the United Arab Emirates, have pushed the IEA’s strategic petroleum stock release to the back burner, making supply disruptions the main story again. Whilst shipping companies remain wary of transiting the Hormuz, despite the Trump administration’s claims that tankers are now ‘dribbling through’, Tehran seems to be eager to make political deals with regional neighbours. Separate deals with Iraq and Pakistan could be the start of something bigger. Oil Exports from Gulf Slump by 60%. Daily exports of crude and products from the Arab Gulf have plunged by 60% since the US-Iran war started, with the previous flow of more than 25 million b/day shrinking to just 9.7 million b/day in the week ending March 15, tightening global oil markets. IEA Is Ready to Double Down on SPR Releases. Fatih Birol, the executive director of the International Energy Agency, has stated that the organization is ready to release more oil stocks if needed, beefing up its largest-ever joint release of 400 million barrels into the market. Iraq Mulls Its Pipeline Options After Kurdish Fiasco. After Iraq failed to persuade the Kurdish Regional Government to resume exports of crude from the country’s south via the Kirkuk-Ceyhan pipeline, Baghdad is now seeking to restart a long-halted pipeline that bypasses Kurdish territory. Iran Attacks UAE’s Domestic Gas Supply. One of the largest gas fields in the United Arab Emirates, ADNOC’s Shah field jointly developed with Occidental Petroleum (NYSE:OXY), has been impacted by a drone attack and forced to shut, closing 1.28 BCf/d gas and 4.2 mtpa sulphur production capacity. Japan Eyes Russian Oil Imports. According to market reports, Japanese refiners are looking to buy Russian crude oil to soften the impact of supply disruptions driven by the closure of the Strait of Hormuz, despite having purchased only one cargo of Sakhalin oil throughout the past 3 years. Canada Pledges Output Increases Instead of SPRs. Canada’s oil producers have pledged to ramp up output by a collective 23.6 million barrels as the country has no strategic petroleum reserves, suggesting that its part of the coordinated IEA release will only materialize in 3-6 months. Trump Forces California Pipe Restart. US upstream firm Sable Offshore (NYSE:SOC) started pumping crude through a long-disputed pipeline system that links California’s Santa Ynez offshore platform with Golden State refineries, shut since 2015, following executive orders from President Trump. US Diesel Jumps Above 5$ Threshold. US average retail diesel prices have jumped above $5 per gallon for the first time since December 2022 and only for the second time in history, according to data from GasBuddy, as oil markets are reeling from the closure of Middle Eastern middle distillates. China’s State Refiners Return to Russian Oil. China’s state-controlled refineries Sinopec and CNPC resumed imports of seaborne Russian crude after a four-month-long hiatus driven by US sanctions on Rosneft and Lukoil, mopping up 10 cargoes of Far Eastern ESPO in the May loading cycle. Iraq Eyes Separate Hormuz Deal with Iran. The government of Iraq is allegedly in talks with Tehran to let some of its oil tankers pass through the Strait of Hormuz, having already slashed 3 million b/d of production due to tight storage capacity and potentially facing even steeper output cuts. Dubai Futures Market Turns into ‘Frenzy’ Mode. Differentials for key Middle Eastern grades have surpassed the mind-boggling $60 per barrel threshold for the first time on record, as S&P Global reported that both cash Dubai and cash Oman settled at a $62 per barrel premium to Dubai futures. Iran War Dampens Outlook for Kuwait. Kuwait’s long-mooted $7 billion midstream infrastructure farm-out deal might be falling apart after Australian investment fund Macquarie (ASX:MQG) decided to withdraw from bidding, citing the uncertain geopolitical outlook in the wider Gulf region. China’s Steel Bonanza Starts to Slow Down. China’s reported production of crude steel dropped by 3.6% year-over-year in January-February to 160.34 million metric tonnes, as Beijing’s export requirements slowed outgoing shipments and nationwide steel margins started to falter. White House Seeks Settlement with French Major. According to the NYT, the Trump administration is drafting agreements to pay nearly $1 billion to French energy giant TotalEnergies (NYSE:TTE) as compensation for the cancellation of its wind farm leases in New York and North Carolina. Oilprice Intelligence brings you the signals before they become front-page news. This is the same expert analysis read by veteran traders and political advisors. Get it free, twice a week, and you'll always know why the market is moving before everyone else. You get the geopolitical intelligence, the hidden inventory data, and the market whispers that move billions - and we'll send you $389 in premium energy intelligence, on us, just for subscribing. Join 400,000+ readers today. Get access immediately by clicking here.