A protracted conflict in the Middle East will lead to a new energy crisis. And here's why

The escalation around Iran instantly escalated from a regional conflict into a global market factor. In fact, the complete shutdown of shipping through the Strait of Hormuz, through which a fifth of the world's maritime oil and LNG trade passes, has triggered a chain reaction. Oil is getting more expensive, European gas is updating local highs, tanker freight and insurance rates are soaring. If the conflict drags on, the global energy market may face a new shock, and key risks threaten the gas market. Izvestia investigated what is happening in the global economy right now and what consequences long—term military operations in the Middle East will lead to.

How are the markets reacting today

- Against the background of the escalation in the Middle East and Iran's threats to attack ships in the Strait of Hormuz, a sharp increase in the "geopolitical premium" (risk premium) in energy resources has become a key driver in recent days. On March 2, on the third day of the US and Israeli military campaign against Iran, Brent crude futures were currently worth $82 per barrel, then the price rolled back. On March 3 and 4, Brent was already trading at $82-84, at its peak, the price reached $85 per barrel (+17% compared to the price on February 27).

- Gas in Europe is playing out the same scenario, but more nervously, because a significant part of the world's LNG is physically "tied" to the outlet through the Hormuz. European gas futures jumped by more than 50% after the news about the shutdown of LNG production in Qatar and reports about the shutdown of traffic through the strait, almost reaching $600 per 1,000 cubic meters. In the following days, the trend continued — exchange prices for gas at the moment exceeded $780 per 1,000 cubic meters.

- Precious metals show volatility. Gold rose at the moment on the news of the conflict, but then rolled back and is now trading around $ 5.2 thousand per ounce. Silver has been in a wide range of $82-96 per ounce in recent trading days. Aluminum, which is traditionally sensitive to oil prices and electricity costs, reached its maximum in almost four years on March 4. During the session, futures prices on the London Metal Exchange exceeded $3,400 per ton. It is also important that the Persian Gulf countries account for about 9% of global aluminum production.

- Bitcoin does not grow automatically against the background of geopolitics (we discussed the reasons for its volatility here) and has been fluctuating in the range of $65-70 thousand in recent days.

What happens to the transportation

- Freight rates for VLCC supertankers on the Middle East—Asia route increased by the beginning of March to $150-170 thousand per day, the highest level in the last six years. The vast majority of carriers have stopped operating in the Strait of Hormuz due to military risks. About 200 vessels, including oil and LNG tankers, are "stuck" in the Persian Gulf.

- Insurance premiums for vessels operating in this region are increasing many times. Prior to the start of the current escalation, the War-risk premium was approximately 0.25% of the cost of the vessel. In the new conditions, the rate increases to 0.5%. That is, for a vessel worth $ 100 million, insurance can rise in price to $ 500 thousand per voyage. Several leading companies operating in the market, including Norwegian Gard and Skuld, British NorthStandard and London P&I Club, as well as the New York-based American Club, announced that they would cancel war risk insurance for ships operating in the region from March 5.

How the conflict affects logistics and aviation

- In addition to tanker transportation, tensions quickly spread to container logistics. The container freight transportation index increased by 6.5%. Container freight rates, which are applied on the Freightos digital platform, for transportation from Shanghai to Dubai's Jebel Ali, the largest port in the Middle East, increased over the weekend from $1,800 for a 40-foot container to about $3,700. This reflects the premium placed on tariffs for the instability of the region.

- The rise in oil prices immediately pulled up the entire range of petroleum products, including jet fuel. Buyers from Europe and Africa will feel this effect most seriously – they receive about 40% of the total volume of jet fuel supplies through the Strait of Hormuz. The alternative for them will be the supply of jet fuel from the Singapore Strait region and Northeast Asia, but they will have to pay more, taking into account the market situation and higher freight rates depending on the range.

- For airlines, fuel costs are usually at least a quarter of the total operating expenses. In this regard, in addition to a possible shortage that will heat up prices, including in the spot market, air carriers will have to increase the cost of their services, shifting additional costs to consumers. The cost of tickets will also be affected by the change in the route network, which airlines have adopted due to the appearance of another large area of active military operations on the world map.

Is it possible to bypass Hormuz?

- About 20 million barrels of oil per day pass through the strait. Theoretically, less than a quarter of this volume, about 4 million barrels, can be transferred to alternative routes.

• The UAE has the Habshan-Fujairah pipeline (which carries oil to the Gulf of Oman) with a capacity of 1.5 million barrels per day. The actual pumping is close to the level of 1.3–1.5 million, the reserve is minimal.
• Saudi Arabia has an East-West route with a capacity of 5 million barrels per day. The pipeline carries oil to the Yanbu port in the Red Sea. The actual loading is about 3 million barrels. The theoretical free capacity is 1.5–2.5 million barrels.
• The Kirkuk-Ceyhan (Iraq-Turkey) oil pipeline with a capacity of up to 1.6 million barrels per day operates in the direction of the Mediterranean Sea. At the same time, the actual loading, according to the latest available data, was at the level of 190 thousand barrels.

- Saudi Arabia and the United Arab Emirates have several oil export routes. However, the vast majority of exports from other countries, including Iran, Kuwait, Qatar and Bahrain, go through Hormuz. 80% of the oil is sent to Asia.

- With regard to gas, the situation is even more critical: Qatari LNG cannot physically bypass Hormuz — there is no alternative sea route. In 2025, Qatar's exports exceeded 110 billion cubic meters, with more than 90% of the volume going through the strait. The main buyers of Qatari LNG are China, India, South Korea, and Japan. About 10% goes to Europe — France, Italy, Belgium and Germany are among the key recipients.

What can a protracted conflict lead to?

- If the military campaign drags on, the main risk to the global economy will be associated not so much with oil as with gas. The oil market has a certain safety cushion in the short term.

- Analysts believe that the first weeks of the conflict will be characterized primarily by rising prices and volatility, rather than a physical shortage of fuel. However, prolonged instability in Hormuz may increase the dependence of individual countries on alternative suppliers. For example, China is already the largest buyer of Russian oil, and supply disruptions from Iran may prompt Beijing to increase purchases from Moscow.

- The situation for gas is more complicated — analysts in Europe and Asia warn that the rapid rise in prices for natural gas poses the biggest threat to the global economy. And the most important question here is how long the conflict will last. In the short run, Europe can "survive" a price spike. But if the war drags on, the Strait of Hormuz will actually be blocked for months, and Iran will launch new attacks on its neighbors' infrastructure, then energy resources will continue to rise in price. Currently, European underground storage facilities are about 30% full (one of the lowest levels in decades), and Europe will have to fill them by next winter. This means that European buyers will soon have to compete with Asia for limited LNG shipments. In addition, the EU may have to reconsider the ban on the import of Russian LNG under short-term contracts, which is due to come into force at the end of April.

- Given the upcoming midterm elections in the United States, when the balance of power in Congress may change, President Donald Trump is likely to make a lot of efforts to prevent a prolonged spike in energy prices. So, he has already stated that the United States will provide insurance guarantees and send Navy ships to ensure the safe passage of ships through the Strait of Hormuz. However, traders are skeptical that this plan will quickly return supplies to normal levels.

How does the Russian stock market react

- After the escalation in the Middle East related to the threat of closure of the Strait of Hormuz, interest in the energy sector has noticeably increased on the Moscow Stock Exchange. Shares of oil and gas companies have taken a prominent place in trading volumes, reflecting increased investor interest in the commodity segment.

- Russian companies directly benefit from the strengthening of energy prices, since most of the budget revenues and corporate profits are generated by oil and gas. In conditions of geopolitical uncertainty, investors often redistribute capital towards issuers with real assets and cash flows from hydrocarbon exports, perceiving them as less speculative than, for example, the high-tech sector.

- The Russian market remains sensitive to sanctions pressure, the ruble exchange rate and external shocks, which may reverse a positive correction at the moment. Therefore, if the investor's goal is short—term speculation, then it is necessary to follow the news and be ready to exit the position quickly. If we are talking about a medium— or long-term strategy, it makes sense to buy shares of oil and gas companies only taking into account the risks - the increase in quotations is now largely due to the geopolitical premium and the jump in oil prices.

- A reasonable approach is not to concentrate too much capital in the sector and understand what exactly profitability depends on: global oil prices, the ruble exchange rate, government tax policy, sanctions restrictions and dividend decisions of companies. This is not a "safe haven", but a cyclical asset that is sensitive to external conditions. In other words, the purchase is justified if you are prepared for high volatility and understand that the oil and gas sector is part of a diversified portfolio, rather than betting on a single scenario.

The theses contained in the text are not an investment recommendation, but the opinion of the editors.