Who pays for the redistribution of the energy market, which began because of the war with Iran. Part 1

• The energy market is shifting to a struggle for physical supplies: Brent has grown by more than 20% in a week.
• Asian economies are under great pressure: almost 70% of oil supplies through Hormuz go to China, India, Japan and South Korea.
• Russian oil is becoming a reserve source of raw materials: the United States has granted India a purchase license, and urgent shipments of Urals are sold at a premium of $2-4 to Brent.
• The most dangerous scenario is attacks on the infrastructure of the Persian Gulf countries.: attacks on key facilities can take millions of barrels out of the system.
• The conflict is already hitting global logistics: carriers are cutting flights to the gulf, insurance premiums and freight are rising, and consumers are paying the bill.

Due to the escalation in Iran, global markets have shifted from a "fear of risk" mode to a struggle for physical resources. The threat to the Strait of Hormuz, a key energy hub, has already begun to change the real flow of raw materials: Brent crude oil shows the largest weekly jump in several years, Europe is facing a new gas shock after supply disruptions from Qatar, and Asian refineries are urgently looking for alternative barrels. The redistribution of the energy market has begun. If the conflict drags on, the whole world will have to pay the bills. Details can be found in the Izvestia article.

The first bill is an oil shock

Before the conflict and the actual shutdown of shipping, a fifth of the world's maritime oil trade passed through the Strait of Hormuz. Almost all of this flow is tied to Asia — more than 80% of energy resources went there. There are no full-fledged alternatives to circumventing the strait (we wrote about this in detail here). Therefore, if supply disruptions occur, as they are now, freight becomes more expensive, insurance premiums rise, and global energy prices soar (Brent has already risen by more than 20% in a week, rising to $94 per barrel during trading on March 6). With a short-term history, the market overpays for risks, as a geopolitical premium is embedded in the cost of raw materials. If the failure drags on, the market goes into physical deficit mode, and the struggle for barrels begins.

Asian importers will be the first to suffer. The main buyers of oil that goes through Hormuz are China, India, Japan and South Korea. They accounted for a combined 69% of all oil shipments through the strait in 2024. The consequences for them are an increase in the cost of fuel, shipping and electricity.

For the United States, the risk is lower: in 2024, crude oil supplies from the Persian Gulf countries fell to the lowest level in almost 40 years — only 0.5 million barrels per day, which accounted for about 7% of American oil imports. In other words, Washington is better physically protected than Asia and Europe, but it is politically involved in the crisis. For the United States, not only the availability of oil is important, but also the price of gasoline at the gas station. On March 6, the average cost of motor fuel rose to $3.32 per gallon (3.8 liters). This creates political risks for both President Donald Trump and his Republican Party in the upcoming midterm elections in November. As a result, American drivers and households pay for this bill first, and then the White House, with a confidence rating if gas station prices do not drop.

An important fork in the road for Russia appears here. To curb rising prices, the United States has granted India a 30-day license to purchase Russian oil, which is already in tankers at sea. According to sources, more than 10 million barrels of Russian oil have already been purchased. This leads to a reduction in the discount on Urals and the appearance of a premium for the urgent delivery of individual shipments. According to Bloomberg sources, processing companies in India pay a premium of $2-4 per barrel of Urals (Brent grade) upon delivery. In February, the price of the reference grade of Russian oil was $15-20 lower than the cost of a barrel of Brent.

As a result, Russian barrels are turning from a sanctioned commodity into an emergency resource for the market, and Asia is actually starting a new redistribution of supplies, primarily between China and India, the largest buyers of Russian oil.

China is not the most vulnerable player in the oil market in this story. Over the years, he has been building up his strategic reserves, while carefully hiding their real volume. Analysts estimate the reserves at 900 million barrels, which is enough for about three months. This gives China a buffer on oil, but it does not completely eliminate the problem. China is able to survive a short shock better than others, but with a prolonged conflict, it will begin to pay with a decrease in the efficiency of its industrial machine.

In the short term, high oil prices help exporters. However, producers in the Persian Gulf have already faced a problem: if there are no exports and production continues, the storage facilities fill up quickly. Iraq has already cut production, announcing the curtailment of production at three major fields. The associated losses can be significant. For example, due to the closure of the Rumaila field, the country will receive about $2.4 billion less every month. At the same time, the site operators will continue to incur operating costs, which amount to $750 million per year.

Analysts expect Kuwait to cut production in the coming days, followed by Saudi Arabia in two weeks. JPMorgan assumes that by Sunday, the Gulf countries will reduce production by more than 3 million barrels of oil per day, and if the conflict lasts two and a half weeks, this figure will increase to almost 5 million. Large-scale production shutdowns are likely to provoke a further spike in oil prices. But expensive oil is beneficial to the exporter only when he can ship it.

The second account is attacks on the oil infrastructure

The most difficult scenario for the market is not just a threat to shipping in the Strait of Hormuz, but Iran's transition to systemic attacks on its neighbors' oil infrastructure: export terminals, oil pipelines bypassing Hormuz, pumping stations, and key processing hubs. One of the key routes for exporting raw materials bypassing the Strait of Hormuz is the Saudi East—West pipeline with a capacity of 5 million barrels of oil per day. In total, pipelines operating in the Gulf countries can theoretically pump up to 6.5 million barrels per day. Compared to the 20 million barrels that passed through Hormuz every day, this is not so much. However, if Tehran implements the threat and starts attacking oil hubs, there will be a risk of a long shortage in the fuel market.

Iranian President Masoud Peseshkian on Saturday, March 7, apologized to his neighbors in the region and promised that the country would stop attacking them in the absence of attacks from their territory. Whether all interested parties will be able to adhere to the terms is an open question.

It is almost impossible to fully protect the oil infrastructure. Deposits, pipelines, and tank farms occupy a large area (for example, the length of the East-West is 1,200 km), and drones and cruise missiles can deliver targeted strikes. At the same time, Iran does not need to hit all the elements of the infrastructure — it is enough to strike at the same nodes so that they cannot be repaired.

On March 2, after an attack by drones launched by Iran, Saudi Aramco shut down its Ras Tanura refinery. It is one of the largest oil refining complexes in the entire Middle East region (with a capacity of 550,000 barrels per day) and one of the key terminals for Saudi oil exports. Presumably, the facility was closed as a precautionary measure after the interception of two drones, the debris of which caused minor fires. That is, a very limited impact on a large node immediately turned into an export risk.

How much it will cost in a modern conflict can only be estimated by a range. A one—time strike on a large Abkaika-type processing unit would result in losses of hundreds of millions of dollars - for repairs, delivery of spare parts, and compensation for operational losses. With regular attacks on several nodes, the bill will already amount to billions — in addition to repairs, these are additional insurance costs, capacity downtime and lost export revenue.

The third bill is logistics

When Hormuz is under attack, not only oil becomes more expensive, but also the delivery of all goods through the region. First, insurance rates and military freight surcharges are rising. Then the number of vessels ready to operate in the risk zone is reduced. Hapag-Lloyd, the largest German container shipping company, has already announced that it does not accept orders for transportation to the Persian Gulf region. This means that transportation is turning from a routine service into a scarce service with a military premium in price.

Such events trigger a chain reaction. When large carriers withdraw from routes or reduce flights, the cost of freight — that is, renting a vessel to transport goods — begins to grow rapidly.

Insurance risks become an additional factor. In the context of a military conflict, insurers increase the so-called war risk premium for ships passing through dangerous zones. Thus, in some cases, insurance premiums have already increased by more than 1,000%. Taking into account the fact that the cost of most tankers is $200-300 million, and the new rate has increased from about 0.25% of the cost of the vessel to 3%, the insurance premium has soared from $625 thousand to $7.5 million.

Another factor is the restructuring of routes. If shipping companies leave the region en masse, some of the cargo will have to be transported by roundabouts. This will lead to longer delivery times, additional fuel costs and crew maintenance. As a result, the increase in transportation costs will inevitably affect the final prices of goods. As a result, the Gulf War will turn into another wave of inflation, for which everyone will pay.