Brent crude prices rose by $3 on Tuesday, reaching $103.20 a barrel as the conflict in the Middle East intensified. The price hike was triggered by Iranian drone attacks on the Shah natural gasfield in the UAE and the Majnoon oilfield in Iraq. Since the war began on February 28, the international benchmark for oil has surged by nearly 50%.
The attack on the Shah gasfield represents a significant tactical shift, as it is the first time production infrastructure has been successfully disabled. The UAE state company, Adnoc, has also suspended operations at the Fujairah port after a tanker was hit by a projectile. These events have crippled the UAE’s ability to export crude oil to a hungry global market.
Iran’s dominance over the Strait of Hormuz continues to be the primary concern for global energy security. Roughly 20% of the world’s oil and gas passes through this narrow channel, which is currently blocked for most Western-aligned trade. The UAE, a top-three Opec producer, is struggling to find any viable route for its exports.
The impact of the supply crunch is being felt most acutely in Asian nations. From Sri Lanka’s mandatory Wednesday holidays to Bangladesh’s planned blackouts, the region is in a scramble to conserve what little fuel remains. Thailand’s government has even requested that employees change their attire to save on cooling costs in public buildings.
While the price of oil remains below the $119.50 peak seen earlier in the war, the volatility shows no signs of slowing. Analysts from Goldman Sachs point out that the shortage of medium-heavy crude is particularly worrisome for the production of essential fuels like diesel. The global community continues to hope for a diplomatic solution while preparing for further escalations.