The war between the United States and Iran escalated Wednesday after a U.S. attack on an Iranian warship off the coast of Sri Lanka deepened the crisis, paralyzing shipping through the Strait of Hormuz for five days and disrupting the flow of vital Middle East oil and gas.
The U.S. submarine attack on an Iranian ship comes as U.S. President Donald Trump has pledged to provide insurance and naval escort for ships exporting oil and gas from the Middle East to curb soaring energy prices.
At least 200 ships, including oil and liquefied natural gas tankers and cargo ships, remained anchored in international waters off the coasts of major Gulf producers including Iraq, Saudi Arabia and Qatar, according to Reuters estimates based on ship-tracking data from the MarineTraffic platform.
Hundreds of other ships remained outside Hormuz, unable to reach the port, according to shipping data. The waterway is a vital artery that carries about one-fifth of the world’s oil and LNG supplies.
The Maltese-flagged container ship Safeen Prestige was also damaged by a projectile while sailing toward the northern end of the Strait of Hormuz, forcing the crew to abandon ship, shipping officials said.
Qatar halted gas production and Iraq cut oil production. Both countries have run out of storage space for gas and oil, making it impossible to load them onto tankers. Saudi Arabia, the UAE and Kuwait are also struggling to load oil, but it is not yet clear whether they will cut production.
Rare tanker transport during transportation freeze
Suez Max tanker Pola made a rare voyage to the UAE through the Strait of Hormuz to load crude oil on Tuesday despite heavy traffic, according to industry sources and LSEG ship tracking data.
Pola switched off her AIS transponder late on March 2, as she approached the Strait, and reappeared off the coast of Abu Dhabi the next day.
President Trump announced Tuesday that he has directed the U.S. International Development Finance Corporation to provide political risk insurance and financial guarantees for maritime trade in the Gulf.
“No matter what, the United States will ensure the free flow of energy to the world,” he said in a social media post.
Oil prices fell on Wednesday, rising 12% for the fourth day in a row since the start of the war on Saturday, as attacks on Iran by the United States and Israel disrupted supplies in the Middle East. The pace of increase has slowed compared to past sessions. Goldman Sachs on Wednesday raised its second-quarter Brent crude oil forecast by $10 to $76 a barrel. It also raised its forecast for WTI by $9 to $71 per barrel.
The bank said risks include longer-than-expected disruptions to oil and gas exports through the Strait of Hormuz and damage to oil production facilities. It also assumes that OECD inventories and Middle East production will decline significantly in March as oil flows through Hormuz decline.
“Protecting all tankers currently operating in areas under threat from Iran is unrealistic as it would require so many warships and other military assets,” said Jakob Larsen, head of safety and security at shipping association BIMCO.
Asia’s scramble for replacement barrels
Some Asian refiners are facing production cuts as the shipment suspension prevents them from quickly obtaining alternative cargo from Gulf region suppliers, four traders and three analysts said.
Asia gets 60% of its oil from the Middle East, leaving the region vulnerable to disruption. Refiners in Indonesia and Japan are sourcing more oil from the United States to make up for the shortfall. India will consider additional purchases from Russia, sources at the two companies said. Saudi Aramco’s Ras Tanura, the country’s largest refinery and major crude oil export terminal, was attacked on Wednesday, four sources said.
(Reporting by Jonathan Saul; Writing by Anna Hirtenstein; Editing by Louise Heavens)
