Petroleum and War: Middle Eastern Media: The most direct beneficiaries of the closure of the Strait of Hormuz are the United States, Russia, and Australia in the following order

The closure of the Strait of Hormuz has exposed the vulnerability of the world's most important energy corridor. The war between the US and Iran has effectively blocked the Strait of Hormuz, a passage connecting Iran and Oman that carries about 20% of global oil and liquefied natural gas (LNG) transportation. Within just ten days, tanker navigation completely stopped, with Brent crude prices surging to around $120 per barrel, and hundreds of ships were forced to delay or reroute. Subsequently, six vessels have been attacked in the Gulf waters.

The impact of the strait closure ultimately depends on its duration. Disruptions lasting several days, although serious, are still manageable; however, disruptions lasting weeks could trigger chain reactions in supply, prices, and finance. What was long considered a tail risk has now become reality, affecting producers, importers, and transit economies differently.

Considerations for Rerouting

The primary issue facing producers in the Gulf region at present is whether alternative infrastructure can withstand this shock. The answer is partially feasible, but it is costly. Currently, only Saudi Arabia and the United Arab Emirates (UAE) have operational pipelines bypassing the Strait of Hormuz, but their total throughput is far below the usual 20 million barrels per day.

Saudi Arabia has activated its East-West Oil Pipeline, rerouting crude oil to the Red Sea port of Jeddah. Pakistan has formally requested that crude oil be rerouted to Jeddah, and Saudi Arabia has assured this, confirming that at least one batch of crude oil has been transported through the pipeline bypassing the Strait of Hormuz. Even at full capacity, these pipelines can only replace a quarter to a third of the normal throughput of the Strait of Hormuz. Meanwhile, the International Energy Agency (IEA) members have agreed to release the largest emergency inventory in the agency's history to alleviate current supply shortages.

The outlook for liquefied natural gas (LNG) is even more severe, as its shipping routes are harder to reroute. After the Iranian drone attacks, Qatar suspended liquefaction production at the Ras Laffan Industrial City and Mesaieed Industrial City and declared that exports were affected by force majeure, almost overnight reducing global LNG supply by about one-fifth. Natural gas prices in Europe and Asia surged by approximately 65%, with the price of LNG delivered in April to Japan and South Korea rising nearly 60%. War risk insurance premiums have also risen sharply, further exacerbating the trend of transporting to longer routes.

Beneficiaries and Resilience

This crisis has produced a small but impactful group of beneficiaries. The most direct beneficiary is the United States. Due to the restrictions on oil production in the Gulf region and the severe limitations on shipping through the Strait of Hormuz, the United States, as the world's largest oil exporter and LNG producer, has had its export routes to the Atlantic unaffected by the crisis.

Within a week of Qatar's shutdown, the stock prices of the two largest US LNG exporters - Chenier Energy and Riverstone Global LNG - rose significantly. This structural asymmetry is very significant: the US imports only 500,000 barrels of natural gas daily through the Strait of Hormuz, so its impact is much less than that of most major economies.

Other beneficiaries are also emerging. As the European market is scrambling to find alternative sources of Qatari gas, Russia has stated that if Europe drops political preconditions, it is willing to resume long-term gas supplies. Australia has also unexpectedly found itself in a favorable position, with its remaining LNG capacity compensating for the global 20% of maritime LNG supply lost due to the Gulf region's shutdown, creating a seller's market for the remaining exporters. Rising oil prices have also benefited Atlantic basin exporters such as Brazil and Guyana, whose crude oil can enter the European and US markets without passing through the Middle East's chokepoint.

In a broader sense, even if it eventually reopens, it will highlight the fragility of the global oil and gas transport system that relies on a single chokepoint for about one-fifth of its volume. Gulf producers may expand bypass infrastructure, while Asian importers may diversify their supply sources. Therefore, this crisis tests a long-standing geopolitical assumption: that relying on a single chokepoint for the majority of global energy transportation is a reasonable trade-off for accessing relatively cheap oil and gas resources.

In this sense, the impact of the Strait of Hormuz crisis goes beyond raising oil prices. It exposes the vulnerability of the world's most important energy corridor and redefines which countries face risks, which countries can avoid the impact, and which countries will have the influence to shape the energy landscape.

Source: Gulf International Forum

Original: toutiao.com/article/1859689282273288/

Statement: This article represents the views of the author alone.