Global energy markets experienced significant turbulence on March 19 as energy facilities in the Middle East came under attack and shipping through the Strait of Hormuz remained suspended. International oil prices surged, with Brent crude rising above $112 per barrel, while the main domestic crude oil futures contract in China climbed to 823 yuan per barrel. Analysis suggests that attacks on Middle Eastern energy infrastructure indicate the conflict involving the U.S., Israel, and Iran has entered a new phase, and upside risks to global oil prices have not yet been fully priced in.
Attacks on energy facilities in the Middle East have triggered unusual movements in oil prices, with notable divergence in regional price trends. Israeli media reported on March 18 that the Israeli Air Force struck a "major natural gas facility" in Bushehr, southern Iran, and was preparing to target other Iranian infrastructure. Countries including Qatar reported damage to oil and gas facilities following Iranian attacks. On March 19, Iran’s Islamic Revolutionary Guard Corps issued a statement claiming it had "destroyed" a series of U.S.-linked oil facilities across the Middle East following heavy strikes, stating that the conflict with the U.S. and Israel has entered a "new stage."
Market concerns over Middle Eastern crude supply have intensified sharply, from shipping disruptions in the Strait of Hormuz to direct attacks on energy production infrastructure. It is important to note that while the market had already priced in some of the risk premium from earlier stages of the conflict, it is now further adjusting for actual supply disruptions, though price reactions vary by region. Analysts point out that supply losses in the Middle East have a direct impact on local crude prices and China’s SC crude futures, but an indirect effect on European and U.S. benchmarks, leading to regional price differences.
Further analysis indicates that Shanghai crude futures have shown relative strength, followed by Brent crude, with WTI crude being the weakest. This price structure reflects the distinct characteristics of each market. WTI, as the benchmark for North America, is least directly affected by Middle East tensions. Brent, as a global benchmark, is more closely linked to Middle Eastern producers. The premium in China’s SC crude futures incorporates supply concerns and rising freight costs.
However, a recent report from J.P. Morgan suggests that current prices of Brent and WTI are being suppressed by inventory and policy factors, leaving room for repricing and further increases. The report notes that if commercial inventories in the Atlantic basin decline rapidly, global markets would be forced to rebalance under tighter supply conditions. Should the Strait of Hormuz remain blocked, Brent and WTI prices could eventually rise toward Middle Eastern spot price levels.
In light of the complex market situation, several analysts observe that market expectations for the geopolitical situation have shifted from "short-term confrontation" to a "medium- or even long-term conflict," which forms the core logic supporting a higher oil price floor. As attacks on Middle Eastern energy facilities escalate, the likelihood of a quick resolution to the conflict has diminished, suggesting that elevated oil prices may persist for an extended period.
Some analysts project that Brent crude futures could rise to $120 per barrel in the coming days. In the event of widespread attacks on energy infrastructure or a prolonged closure of the Strait of Hormuz, Brent could average $130 per barrel in the second and third quarters of this year.
Looking ahead, oil prices are expected to rise at a more gradual pace, with stronger underlying momentum than previous short-lived spikes. The blockage of the Strait of Hormuz complicates crude exports from the Middle East, while direct strikes on Iranian gas fields and facilities further constrain future export capacity, leading to marginal supply reductions. Iran’s retaliatory actions also deepen the impact across the entire oil supply chain.
Experts emphasize that the longer the Strait of Hormuz remains closed, the more severe the consequences. If oilfields are shut down for more than 25 days, restarting them could take months. This means that even if the conflict ends and the strait reopens, these fields cannot resume production quickly.
Persistently high oil prices also raise the risk of "stagflation" for the global economy. Pressure on the global energy supply chain poses a key risk for the U.S. in the form of rising inflation driven by higher international oil prices. If oil price increases lead to a significant rise in inflation, the Federal Reserve may be forced to raise interest rates to curb inflation, which could negatively impact U.S. fiscal sustainability and interest rate-sensitive sectors such as technology stocks.