As of March 3, the Middle East situation continued to escalate. Iran announced the blockade of the Strait of Hormuz, and Qatar’s energy facilities were attacked and suspended production. The global energy supply chain is facing a serious impact. The EU held an emergency energy security meeting to assess the impact of the situation on energy supply.

The Strait of Hormuz is one of the most important energy transportation channels in the world, undertaking more than 20% of the world’s oil trade and almost all of Qatar’s LNG transportation. After Iran announced the blockade of the strait, oil tanker transportation was hindered, insurance costs soared, leading to a short-term shortage of global crude oil supply and intensified market panic.

To ease the supply tension, OPEC+ announced that it would increase crude oil production by 206,000 barrels per day starting from April, higher than market expectations, and Saudi Arabia has increased exports by about 500,000 barrels per day in advance. However, analysts pointed out that the effect of increasing production is limited. The conflict has led to an actual reduction in supply by millions of barrels per day, and if the conflict continues, it will still not be able to fully offset the supply loss.

Europe is the most directly affected. Its natural gas is highly dependent on imports. The suspension of Qatar’s energy production led to a sharp intraday surge of more than 50% in European benchmark natural gas prices. The European Commission stated that the Gas Coordination Group will hold a meeting on the 4th to discuss response measures to ensure the stability of energy supply. At the same time, the energy sector of stock markets in many European countries rose, while other sectors generally fell, reflecting market concerns about rising energy costs and slowing economic recovery.

The industry expects that global energy prices will remain highly volatile in the short term. If the Strait of Hormuz is impassable for a long time, under extreme circumstances, the global short-term crude oil supply will decrease by about 10 million barrels per day, further pushing up global inflationary pressure and impacting the global economic recovery.