US Oil Prices Surge Amid Escalating US-Iran Conflict, Disrupting Shipping

US Oil Prices Surge Amid Escalating US-Iran Conflict

Oil prices surged over 8% on Monday (Mar 2) as tensions between the US and Iran escalated in the Middle East, disrupting global shipping and crude oil supply through key routes like the Strait of Hormuz.

Israel launched fresh strikes on Tehran, with Iran responding by launching missile barrages. This comes a day after the killing of Supreme Leader Ali Khamenei heightened uncertainty in the region and globally.

At least three tankers were damaged off the Gulf coast, with one seafarer killed as retaliation for US and Israeli strikes exposed ships to collateral damage. Shipping sources reported that most tanker owners have suspended crude oil, fuel, and liquefied natural gas shipments via the Strait of Hormuz due to Tehran's warnings.

Over 20% of global oil is moved through this waterway, but alternative infrastructure like Saudi Arabia's East-West pipeline and Abu Dhabi's pipeline could help bypass the disruption. However, Rystad energy economist Jorge Leon estimates that even after diverting some flows, the net impact would still result in a loss of 8 million to 10 million barrels per day of crude oil supply.