After the United States struck Iran's nuclear facilities, Iran warned again that it could block the Strait of Hormuz. The mere concern over the blockade of the Strait of Hormuz caused international oil prices to soar. In the worst-case scenario, it is projected that international oil prices could rise to $130 per barrel, similar to early March 2022, shortly after the outbreak of the Russia-Ukraine war.
The Strait of Hormuz is a passage that connects the Persian Gulf and the Gulf of Oman, through which more than 20% of the world's crude oil and liquefied natural gas (LNG) pass. If Iran blocks the Strait of Hormuz, it will severely disrupt crude oil and LNG trade, leading to a surge in energy prices.
According to the financial investment industry on the 23rd, the price of Brent crude oil, the international oil price benchmark for the nearest month (August delivery), was traded at $79.1 on the European ICE Futures Exchange at 10:20 a.m. Korean time that day. It rose to as high as $81.4 per barrel in the early trading session. This is the first time it has broken through the $80 mark since August of last year.
The recent sharp rise in international oil prices is influenced by the Iranian parliament's resolution to block the Strait of Hormuz as a retaliatory measure against the West. The final decision on the blockade of the strait is made by the Iranian Supreme National Security Council (SNSC).
Previously, global investment bank JP Morgan assessed that if the Middle East conflict escalates and the blockade of the Strait of Hormuz becomes a reality, international oil prices could surge to between $120 and $130 per barrel.
Barclays also projected that if Iran faces disruptions in its crude oil exports, international oil prices would soar to $85 per barrel, and if conflicts escalate further due to airstrikes on energy facilities, prices could exceed $100 per barrel. Other investment banks such as Citigroup and Goldman Sachs also forecast that international oil prices could spike to the $90 per barrel range in the short term.
Brent crude oil last exceeded $130 per barrel in early March 2022. As Russia invaded Ukraine, prices surged from around $90 per barrel to $139.13 per barrel in about two weeks, reaching an all-time high.
At that time, the rise in international oil prices caused domestic stock markets to undergo adjustments. However, the utility sector, which includes oil-related stocks, rose by more than 8%. Refining, construction, and shipping stocks also showed strong performance.
There is a possibility that a similar trend will emerge this time as well. Jeong Yu-jin, a researcher at iM Securities, noted that if the Strait of Hormuz is blocked, disrupting crude oil and refined product transportation, the refining margins of domestic refiners, including S-Oil, may rise. He also mentioned that the halt in methanol production by Iran could lead to a stoppage in the operations of methanol-based petrochemical facilities in China, which had been procured at low prices. This could reduce supply pressures in the domestic petrochemical industry.
Freight rates for oil tankers are also strong. Unlike the recent sharp decline in the container ship freight index (SCFI), freight rates for very large crude carriers (VLCCs) on the Middle East to Asia route soared by 85.2% in just two weeks. Lee Jae-hyuk, a researcher at LS Securities, said, "The average number of VLCC calls at the Strait of Hormuz was 22 ships as of the 19th, which is similar to the usual level, but if the blockade measures intensify, there will be an impact on oil maritime freight volumes."
However, there is a prevailing forecast that it will be difficult for international oil prices to maintain a strong upward trend for an extended period. The main reason is that it is practically not easy for Iran to maintain a blockade of the Strait of Hormuz for a long duration, as it would heavily impact its own economy. In particular, half of the area, which is 9 km to 10 km wide actually used as a navigation route in the Strait of Hormuz, falls within Iranian territorial waters, while the other half is within Omani territorial waters.
As a result, overseas investment banks are maintaining their previous forecast that international oil prices will remain in the $60 per barrel range by the end of this year.
There are also analyses suggesting that Iran's daily crude oil production, approximately 3.3 million barrels, could be compensated for by the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ member countries simply by reducing the current production cuts. Additionally, the potential restriction of crude oil demand due to a global slowdown in the second half of this year is also seen as a factor that could limit the strength of international oil prices.