The strikes on Iran appear tied to ongoing regional tensions (nuclear program, proxies, etc.).

The Strait of Hormuz remains a critical chokepoint: ~21 million barrels per day of oil and significant LNG volumes pass through it in normal times. Any sustained closure or threat of attacks sends insurance costs soaring and deters tanker traffic.

Current market reactions (from related coverage):

• Oil prices have risen, though not yet to extreme “war premium” levels ($110+ per barrel in some worst-case models).
• LNG spot prices and European/Asian import concerns are elevated due to potential Qatari supply risks.
• Spare capacity in the U.S., Canada, or other non-OPEC+ producers offers some buffer, but it cannot fully replace Gulf volumes in the short term, especially for certain crude grades or LNG.

This fits a pattern of geopolitical energy shocks: Hormuz threats have historically spiked prices (e.g., tanker attacks in 2019), but full infrastructure damage would be far more severe and longer-lasting than temporary shipping disruptions.

Clyde Russell’s Reuters column (published March 30, 2026) is titled exactly “Crude oil and LNG supply are at risk of the worst-possible scenario”.

It warns that, one month after U.S. and Israeli strikes on Iran, global energy markets for crude oil, refined products, and liquefied natural gas (LNG) are already in the second-worst possible scenario — with the true worst-case still a real and growing threat.

Everything hinges on the Strait of Hormuz, the narrow chokepoint that normally carries about 20% of global seaborne crude oil, refined products, and LNG.

• A month into the conflict, the strait is effectively closed to most commercial shipping. Tanker traffic has slowed to a trickle (only a handful of vessels in March), forcing rerouting, soaring insurance costs, and immediate supply tightness.
• This has already disrupted ~19 million barrels per day of oil flows and significant Qatari LNG exports.
• The worst-possible scenario (not yet fully realized) would involve Iran using missiles, drones, or proxies to cause long-term physical damage to energy infrastructure across the Gulf — pipelines, refineries, processing plants, and export terminals in Saudi Arabia, UAE, Qatar, Kuwait, or Iraq. reuters.com

Russell notes that markets have avoided the absolute catastrophe so far, but the current situation is dangerous enough: limited spare capacity elsewhere cannot quickly replace lost Gulf volumes, especially for certain crude grades and LNG.

Current Situation (as of April 1, 2026)

• The 2026 Strait of Hormuz crisis is ongoing. Traffic remains severely restricted, with major shipping firms largely avoiding the area.
• Oil prices have already spiked sharply (Brent crude surpassed $100/bbl in early March and hit peaks near $126 in some reports).
• LNG markets are under pressure: Qatar (a top global exporter) routes almost all its cargoes through the strait, threatening supplies to Europe and especially South Asia. Analysts warn of potential 2–3 Mt lower LNG demand in South Asia through Q3 2026 due to shortages and rationing risks. woodmac.com
• Refined products (diesel, jet fuel) are also tightening globally.

_____________________________________________________________________________________

Crude oil and LNG supply are at risk of the worst-possible scenario: Russell

From The BOE Report

By Reuters

A month after U.S. and Israeli strikes on Iran, global markets for the supply of crude oil, refined products and liquefied natural gas are already in the second-worst possible scenario.

Everything hinges on the Strait of Hormuz. This chokepoint, which normally carries around 20% of global crude, products and LNG, is still effectively closed to most shipping, leaving energy markets dangerously exposed.

Under those conditions, claims by Washington or Israel that they are somehow winning the war against Iran are largely meaningless.

It may well be true that the U.S. and Israeli air campaign has decapitated Iran’s leadership and degraded key military capabilities.

But the reality is that most tankers still cannot transit the Strait of Hormuz safely, while Iran has demonstrated a clear ability to strike energy and other critical infrastructure across the Gulf. That leaves Tehran shaping the narrative – and, more importantly, holding the global economy to ransom at the same time.

What would the worst-case scenario look like?

It would be a sharp escalation in which Iran inflicts widespread damage on Gulf energy infrastructure, using missiles and drones to hit pipelines, refineries, processing plants and export terminals across the region.

The likely trigger for such action would be U.S. ground forces trying to capture and hold Iranian-controlled territory, such as the Kharg Island oil terminal and small islands in the Strait of Hormuz.

Deploying ground troops is something that U.S. President Donald Trump is said to be considering and U.S. forces in the region have been building.

But even a militarily successful invasion would be meaningless if it triggers widespread destruction of energy infrastructure, escalating an already serious market crisis into an unprecedented global energy disaster.

The crude oil futures market, as shown by Brent contracts, is still largely pricing for a de-escalation and an eventual return to normal flows through the Strait of Hormuz.

Brent futures opened higher in early Asian trade on Monday, gaining 2.7% to trade around $115.55 a barrel, up from the close of $112.57 on March 27.

They have now gained 59% since the close of $72.48 a barrel on February 27, the day before the U.S. and Israel attacked Iran.

That may look like a strong rally, but it pales when compared to the physical prices of refined products in Asia, where the biggest impact of the current crisis is being felt.

Singapore traded jet fuel ended at $222.77 a barrel on March 27, not far below the record $227.98 hit on March 23 and more than double the $93.45 from February 27.

Gasoil, the building block for diesel, ended at $182.76 a barrel on March 27, almost exactly double the $91.42 on February 27, while gasoline finished at $130.52, up 65% from the day before the conflict started.

These prices reflect that Asian refiners are scrambling for sufficient crude to operate, while fuel importers such as Australia and Indonesia are rushing to secure supplies.

PAIN TO SPREAD

The stress in Asian refined product markets reflects that the fallout from the war in Iran has hit the region first, which isn’t surprising given Asia is the destination for around 80% of the crude and refined fuels shipped through the Strait of Hormuz.

But the pain felt in Asia will quickly spread around the world, as refiners and fuel importers pull scarce cargoes from the Atlantic Basin, forcing prices higher well beyond the region.

The problem is that the world is effectively down around 12 million barrels per day (bpd) of crude and refined products.

This is because around 19 million bpd has been going through the Strait of Hormuz in recent months, a flow that has now slowed to a trickle, with only a handful of vessels passing through so far in March.

Saudi Arabia’s ramping up of exports through ports on the Red Sea and the United Arab Emirates boosting shipments from Fujairah on the Gulf of Oman have mitigated some of the loss of volumes through the vital gateway.

But the shock of losing more than 10% of global crude supply cannot be offset by releasing some strategic reserves, at least not over the longer term.

The real risk is that the conflict with Iran drags on, or escalates further, in the weeks ahead.

Imagine a U.S. ground invasion triggering Iranian strikes on the Saudi pipeline to the Red Sea, or on critical facilities at Fujairah.

Or consider Iran’s Houthi allies in Yemen effectively closing the Bab el-Mandeb passage between the Red Sea and the Gulf of Aden, a move that would mean Saudi exports could only flow north through the Suez Canal, adding significant time, cost and congestion for cargoes bound for Asia.29dk2902lhttps://boereport.com/29dk2902l.html

The risk is that the crude oil and LNG markets may have to start pricing for a sustained loss of supplies from the Middle East, something they have not fully done as yet.

Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis of everything from swap rates to soybeans. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn and X.

The views expressed here are those of the author, a columnist for Reuters.

(Editing by Shri Navaratnam)