West Asia War Disrupts Oil Supply as Gulf Producers Cut Output, Hormuz Blocked

Global oil markets are under mounting pressure as the ongoing conflict involving the United States, Israel and Iran disrupts energy flows through the crucial Strait of Hormuz.

According to a report by Bloomberg, the combination of shipping disruptions and production cuts by Gulf producers has intensified fears of a prolonged global supply shock. The Strait of Hormuz — one of the world’s most important oil transit routes — normally carries about one-fifth of global crude oil and liquefied natural gas shipments. With vessels avoiding the narrow passage amid security concerns, energy markets are witnessing heightened volatility and supply uncertainty.

Several Gulf exporters, including the United Arab Emirates, Kuwait and Iraq, have already begun trimming oil production as tanker storage fills up and shipments slow. Analysts warn that if the disruption continues, additional producers may also be forced to cut output.

Saudi Arabia has attempted to reduce its dependence on the Strait by diverting some crude exports to ports on the Red Sea through its pipeline network. However, a large share of the region’s oil still relies on the Hormuz route, leaving global supply exposed.

Oil Prices Surge

The uncertainty has already triggered a sharp rally in global oil prices. The benchmark Brent crude rose nearly 30 percent last week — its steepest weekly gain in six years — approaching the $100-per-barrel level.

Regional oil benchmarks have already crossed that threshold. Futures for Murban crude from Abu Dhabi settled around $103 per barrel, while Oman crude climbed to about $107. Meanwhile, Chinese crude futures traded near $109 on the Shanghai International Energy Exchange.

Stefano Grasso, senior portfolio manager at Singapore-based investment firm 8VantEdge Pte, said that continued disruption could push prices even higher in the short term, noting that every additional day of blocked flows adds pressure to the global market.

Asia Faces the Brunt

Import-dependent Asian economies are feeling the impact most strongly. Japan, which depends on the Gulf for more than 90 percent of its oil imports, is reportedly considering tapping into its strategic petroleum reserves.

China has curtailed fuel exports to secure domestic supply, while South Korea is reviewing measures to manage rising energy costs. The ripple effects are also visible in Europe. In northwest Europe, jet fuel prices have surged to record levels amid tighter supply and continued disruptions in shipments through Hormuz.

Analysts at ING Groep estimate that the disruption could last for at least four weeks, including two weeks of severe upheaval followed by two weeks of partial flows. In a more extreme scenario, a three-month closure of the Strait could drive crude oil and LNG prices to record highs.

Warren Patterson, head of commodities strategy at ING in Singapore, said that while the conflict may not end quickly, a weakening of Iran’s capacity to target shipping could eventually allow energy flows through the Strait of Hormuz to gradually resume.