Energy Markets Adapt to Iran War as Oil Flows Hold Up Despite Shipping Risks

Despite Iran stepping up attacks on tankers in the Strait of Hormuz, oil shipments from the region have remained above prewar levels as Persian Gulf states avoid actions that could trigger a wider escalation, Jason Ma reported for Fortune.

Oil tankers and alternative pipeline routes are helping maintain global energy supplies despite ongoing conflict and shipping risks around the Strait of Hormuz.

According to energy-tracking firm Kpler, shipments through the strait and alternative routes averaged more than 24 million barrels a day during the previous week, exceeding the prewar average of 23.3 million barrels a day before the United States and Israel launched military operations against Iran in late February.

However, traffic through the Strait of Hormuz has not returned to normal.

The threat of Iranian attacks continues to deter some tankers, although the financial incentives for transporting oil through the region have encouraged enough vessels to continue operating.

Pipelines that bypass the strait are also helping maintain supplies, while major oil-consuming countries have reduced demand.

Some Middle Eastern crude grades sold in Asian markets are reportedly trading below prices recorded a month earlier, according to sources cited by Bloomberg.

Although the conflict has continued for approximately eight months without a clear end in sight, global oil markets have avoided a major supply collapse.

Brent crude prices have risen following reports that the United States and Israel could launch further attacks on Iran, but prices remain below the peaks recorded earlier in the conflict.

Analysts at JPMorgan said in a recent note that energy-security shocks were becoming persistent rather than isolated events, leaving supply chains and shipping routes exposed to continuing risks.

“Energy markets are converging on a forever conflict in the Middle East, but supply has been resilient and demand destruction in China has been key,” the analysts wrote.

The assessment reflects a market adjusting to prolonged geopolitical uncertainty rather than assuming that disruptions will soon end.

Continued supplies, alternative transport routes and weaker demand have helped offset some of the risks associated with the conflict.

Nevertheless, the resilience could be tested if attacks spread to major oil terminals, pipelines or other critical infrastructure. Iran has warned that further US-Israeli attacks could prompt retaliation against energy facilities and other infrastructure across the region.

Such escalation could trigger reciprocal strikes that disrupt oil production and exports, potentially creating a more severe energy crisis.

For now, oil producers and governments appear to be balancing military and political objectives against the risk of damaging infrastructure that remains essential to their own economies and global energy markets.