CICC Wealth Futures: Strait of Hormuz Blockade Causes Paralyzation of the Global Crude Oil Trade Hub, Oil Price Fluctuations Intensify

After the United States and Israel launched a large-scale military strike against Iran, Iran quickly retaliated with ballistic missiles and drones targeting Israel and nearby U.S. military bases. This conflict is the most intense since the Iraq War. Major oil-producing countries in the Gulf region and shipping routes for crude oil are affected, especially the Strait of Hormuz, which has been blockaded by Iran, causing the global crude oil trade hub to come to a standstill. The Iranian Revolutionary Guard issued a warning that if Iran’s oil fields and related facilities are attacked, all Middle Eastern oil producers’ capacities will be destroyed in response. On the first trading day after the upheaval, international crude oil prices performed strongly but with restrained gains, as traders had fully priced in extreme scenarios. Brent crude traded at a premium above $70, reflecting risk premiums already accounted for. Currently, over a hundred VLCCs are anchored inside and outside the Persian Gulf. How long the Strait of Hormuz remains open is key to short-term oil price trends. If the 20 million barrels per day of exports continue to be blocked, future oil price fluctuations could be unpredictable. (CICC Wealth Futures)