The escalating conflict in the Middle East is triggering the most severe shock to global energy markets in years. Military strikes by the United States and Israel against Iran entered their seventh day on Friday, March 6. Iran has stated it is prepared for a prolonged war and is developing new weapons. The ongoing escalation pushed Brent crude to surge as much as 12% intraday to $94.41 per barrel. West Texas Intermediate (WTI) crude skyrocketed over 17% at one point to $92.37 per barrel, registering a 35% cumulative weekly gain, its largest weekly increase on record. Led by crude oil, the broader commodity market rallied, with the Bloomberg Commodity Spot Index rising 3.7%, marking its largest gain since July 2022. The index broke through 701.5756 points to set a new all-time high. NYMEX natural gas futures also advanced, climbing up to 9% during the day to $3.274 per million British thermal units. The situation for European Union natural gas prices was more severe this week, with prices at one point more than doubling, accumulating gains exceeding 100%. Aluminum prices also spiked due to export disruptions from the Middle East caused by the conflict. Boosted by safe-haven demand, both gold and silver posted gains during the session, but still closed lower for the week. Citigroup estimates that disruptions in the Strait of Hormuz could lead to a daily global crude oil supply loss of 7 to 11 million barrels. Qatar's Energy Minister warned that if shipping disruptions persist, oil prices could surge to $150 per barrel within two to three weeks.

The Strait of Hormuz, a critical passage linking the Persian Gulf to global markets, normally handles about one-fifth of the world's oil flow, with approximately 20 million barrels of crude and petroleum products transiting daily last year. Reports indicate that commercial transit through the strait has been "almost completely halted," citing reasons including security threats, insurance constraints, operational uncertainties, and physical disruptions. Kuwait has begun reducing output at some oil fields due to full storage capacity, becoming the latest sign of supply damage in the Middle East. Simultaneously, Saudi Arabia is diverting millions of barrels of crude to Red Sea ports to avoid the risks associated with the Strait of Hormuz and has raised the official selling price for its key crude grade for Asian buyers in April by the largest margin since August 2022. As the situation spreads, oil-producing countries are being forced to implement emergency responses. The Brent crude prompt spread, the price difference between the nearest two contracts, has widened to a premium of $5.76 per barrel, compared to just 58 cents a month ago, indicating extreme tightness in the physical market.

In Asia, supply pressures are being transmitted to major consumers. Japanese refiners have requested the government to tap strategic petroleum reserves. The Japanese government is reportedly evaluating the possibility of using strategic reserves but has not yet taken action. Market participants speculate that a coordinated release of emergency stockpiles by multiple countries would maximize the stabilizing effect on the market.

As the situation continues to deteriorate, Wall Street institutions have begun pricing in extreme scenarios. Samantha Dart, co-head of commodities research at Goldman Sachs, stated in a media interview that if the low-flow state in the Strait of Hormuz persists for another five weeks, Brent crude prices breaking above $100 per barrel is possible. However, Goldman's base case scenario still predicts a gradual restoration of transit through the strait and forecasts an average Brent price of $76 per barrel for the second quarter. Qatar's Energy Minister issued a stronger warning in an interview with the Financial Times, stating that if tankers and commercial vessels remain unable to pass through the Strait of Hormuz, oil prices could climb to $150 per barrel within two to three weeks. On Thursday, the U.S. average retail gasoline price at pumps rose to $3.32 per gallon, the highest level in 2024. ICE Futures Europe low-sulfur gasoil futures recorded a weekly gain of over 50%, the largest single-week increase on record.

The liquefied natural gas (LNG) market is also facing direct impact. Earlier this week, Qatar shut down its LNG export facilities at Ras Laffan, the world's largest LNG export hub, following a drone attack by Iran. According to Bloomberg-compiled ship-tracking data and informed traders, at least two LNG carriers long-term chartered by QatarEnergy, the Al Thumama and the Mesaieed, have been offered into the spot market; both vessels are currently located near the West African coast. The accumulating pressure on the supply side may lead the EU to reconsider its ban on Russian gas imports. Norway's Energy Minister, Terje Aasland, stated at a meeting in Oslo that the EU has consistently expressed a desire to end dependence on Russian oil and gas, but events of the past three to four days have made the situation difficult. Given the current geopolitical climate, he believes related discussions will restart. As previously reported, the 27 EU member states formally adopted regulations on January 26 of this year to gradually ban imports of pipeline gas and LNG from Russia.