BNY’s Bob Savage reports that the International Energy Agency warns of the biggest energy security threat in history as the Iran conflict and Strait of Hormuz closure remove significant Oil supply. Savage details tanker interceptions, rising crack spreads and stronger Brent options activity. He underlines that conflict duration and blockade escalation are central to Oil price risks and backwardation dynamics.

Hormuz disruption drives Oil risk

"The Iran talks are in limbo. The Strait of Hormuz remains mostly shut. The duration of the conflict continues to be the key risk factor for markets as they watch commodity prices and economic data for clues about growth and inflation."

"Vessel traffic through Hormuz dropped to two from three yesterday, with Iranian gunboats firing on commercial ships. The U.S. intercepted two oil tankers and has a third under escort in the Indian Ocean. Reuters reports that the U.S. has intercepted three other tankers in Asian waters near Sri Lanka and Malaysia. "

"Escalation in the blockade has added to oil prices. The crack spreads for gasoline and diesel have continued to rise. Futures see Brent put activity in June and July rising, as the conflict end-date extends, with June-July backwardation touching $6.50 overnight."

"The head of the International Energy Agency has warned that the world is facing the biggest energy security threat in history, citing severe supply disruptions caused by the Iran conflict and the closure of the Strait of Hormuz."

"Fatih Birol said around 13 million barrels/day of oil supply have been lost, with the key shipping route effectively under a double blockade, halting flows that previously averaged 20 million barrels daily. "

"The disruption is expected to hit global growth, push up inflation and risk fuel shortages, particularly in Europe where jet fuel supplies could run short within weeks."

"While emergency stock releases are providing temporary relief, Birol stressed that reopening the strait is essential, urging governments to diversify energy sources and consider demand reduction measures if shortages persist."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)