Washington’s gamble sends oil prices soaring

The war with Iran, a conflict unleashed by the USA and Israel, has now raged for over two weeks. It has dramatically upended the pricing dynamics of the global energy market — oil and gas prices have rocketed. And this trend shows every sign of accelerating.

It is becoming painfully clear that no respite is in sight. The White House is merely turning up the heat. On March 13, US leader Donald Trump declared on his Truth Social platform that the US Central Command had launched "one of the most massive airstrikes in the history of the Middle East." The bombs fell on the Iranian island of Kharg, the vital hub that handles nearly 90 percent of Iran's oil exports. The Republic has already threatened a fierce response. Yet, according to Trump, the island's oil infrastructure was deliberately spared "out of decency."

Here, "decency" can reasonably be interpreted as preventing an even more acute shortage in the global supply of "black gold." Because if Washington, in the course of its war with Iran, were to destroy the Republic's oil infrastructure, it would send the price of a barrel into the stratosphere. And that, frankly, could become a major headache for the man in the White House, with the US midterm elections looming this autumn. True, Donald Trump recently claimed that expensive oil benefits the US. In a way, he has a point, given that it fattens the profits of American shale producers.

For now, passage through the Strait of Hormuz — the conduit for roughly 20 percent of the world's seaborne oil — remains almost completely choked off, with this "blockade" now in its third week. This is leading to a cumulative spiral of supply shortages, stoking fears among market players and fueling the surge in exchange prices. The barrel is now hovering near the hundred-dollar mark, and during some sessions, it has smashed through that "psychological" ceiling.

Where do we go from here? No one has a clear answer — not even the experts. It all hinges on the duration of this war against Iran, a conflagration the US and Israel lit back in late February.

For now, Trump is constantly proclaiming in public that the goals of the military operation against Iran have nearly been achieved. This gives reason to believe that an American ground invasion of the Republic is off the table, suggesting that Washington's military campaign against Iran might, in theory, wrap up soon. On the other hand, the missile "exchanges" between the sides remain as intense as ever. So, at least for the coming weeks, any hope of a lull in activity is likely wishful thinking.

In light of this, the forecast consensus on the barrel's price trajectory remains firmly "bullish." A number of global investment banks (Morgan Stanley, Goldman Sachs) and consultants (for instance, the research firm Wood Mackenzie) are now predicting that the global price per barrel could hit $150 or more if the military conflict drags on. If these forecasts pan out, it would mark a new all-time record for the barrel. Brent crude has already breached the $100 mark.

Meanwhile, the US and its ideological allies are scrambling to counteract the shortage on the global oil market. On March 12, the International Energy Agency (IEA) announced the tapping of strategic reserves from the dozens of countries that make up the organization. In total, we are talking about 400 million barrels of oil and refined products, with America's contribution clocking in at just over 170 million barrels.

On top of that, the US has exempted Russian seaborne oil loaded onto tankers before March 12 from sanctions, which "frees up" another 100-120 million barrels. The OFAC license is temporary, valid through April 11 inclusive.

Crunching the numbers, these additional interventions meant to "cover" the shortfall caused by the Hormuz blockade — with potential market losses estimated at a staggering 20 million barrels per day that consumers are being deprived of due to the choked artery — will last roughly 25 days.

If we factor in some rerouting of supplies from the Gulf monarchies' oil shipments "trapped" in Hormuz to alternative routes, the actual "loss" clocks in at around 15 million barrels per day. That, however, doesn't dramatically shift the bigger picture. Especially since production at several regional fields has ground to a halt because reserve storage capacity is maxed out — filled to the brim. And on top of all this, with war raging across the Middle East, the seasonal factor could throw yet another log onto the barrel's price fire.

If the Hormuz blockade drags on for another month, the US and its G7 allies will have to go scavenging for reserves again — and may well be forced to grant even greater sanctions relief for Russian oil. The US President has already made a point of promising that he will reinstate the recently suspended sanctions against Moscow the moment the oil market crisis is over.

Russia, for its part, is merely an unwilling beneficiary of the conflict when it comes to hydrocarbon pricing. Naturally, our country's official stance is one of sharp criticism and outright condemnation of the US and Israeli attack on friendly Iran.

Moscow absolutely rejects the use of military force against a sovereign republic. Russia's Permanent Representative to the UN, Vasily Nebenzya, has stressed that Russia opposes unilateral pressure on Iran and considers the actions of the US and Israel — taken without UN Security Council authorization — to be patently illegal.