Middle East Conflict Strangles Global Energy Transit

The scale of the disruption is becoming impossible for markets to ignore. China’s crude imports plummeted 41% year-on-year in June to 7.12 million barrels per day, the lowest level since 2016, as regional instability strangled supply lines. Meanwhile, the U.S. military has intensified its naval blockade, redirecting commercial vessels and reviving an enforcement campaign that has already intercepted dozens of ships. The violence has spread to critical infrastructure, with drone threats briefly halting Iraqi loadings at Basra and security concerns forcing the Khor Mor gas field offline, resulting in a 2.5 GW power loss in Kurdistan.

Energy-dependent nations are now scrambling to insulate their domestic markets. India has banned its seafarers from transiting the Strait of Hormuz following the deaths of two nationals and has aggressively hiked export taxes on diesel and jet fuel to shield local supplies. Pakistan, facing a critical shortfall, was forced to pay a premium of $20.7/MMBtu for emergency LNG cargoes from PetroChina. Fatih Birol, head of the IEA, warned that unless the strait reopens within weeks, the ripple effects on fertilizer and gas supplies will devastate import-dependent Asian economies, while rising costs for commodities like sulphur are already driving up nickel prices globally.