As conflict escalates between Israel and Iran, energy giant Shell has issued a stark warning that a blockade of the Strait of Hormuz — a critical maritime chokepoint — could trigger a severe shock to global trade and energy markets. The strait is a narrow waterway that connects the Persian Gulf and the Gulf of Oman and is the only passage from the oil-rich gulf to the Indian Ocean.
Wael Sawan, chief executive of Shell Plc, speaking at the Japan Energy Summit & Exhibition in Tokyo, said the company was “being very careful” with its shipping operations in the Middle East and had activated contingency plans in anticipation of a possible deterioration in the conflict.
“If that artery is blocked, for whatever reason, it has a huge impact on global trade,” Sawan was quoted as saying by news outlet Bloomberg. He was referring to the strait through which about a quarter of the world’s oil trade flows.
Shell, one of the world’s largest traders of oil and gas, is particularly concerned about the rising risks to navigation in the region. “What is particularly challenging right now is some of the jamming that’s happening,” Sawan was quoted by British news portal The Guardian as saying.
The CEO was referencing recent interference in ship navigation signals in and around the Persian Gulf — a development that has already prompted cautious rerouting and operational delays.
While crude prices have surged in reaction to the hostilities, flows of oil and gas through the Strait have not yet been significantly disrupted. However, the market remains highly alert. Brent crude rose nearly 1 per cent to over $77 a barrel on Thursday, nearing its highest level since January, with the spike intensifying after Israel launched attacks on Iran last week, according to The Guardian.
The spectre of further escalation looms, particularly amid indications that the United States may directly enter the conflict. US President Donald Trump has fuelled speculation by stating, “I may do it, I may not do it. I mean, nobody knows what I’m going to do,” when asked about possible US intervention.
The potential consequences of such an intervention are significant. Analysts at RBC Capital Markets warned that if Iran perceives an existential threat, it may target tankers and critical infrastructure directly. “Direct US entry into this conflict could be a catalyst for more direct disruptive actions,” noted analysts including Helima Croft in the Bloomberg article.
Recent disruptions are already pushing up costs. The daily price to charter a very large crude carrier from the Gulf to China more than doubled in the days following Israel’s attacks — from $19,998 to $47,609 — far outpacing general tanker rate increases globally reported
The Guardian.
In response, countries and shipping firms are taking precautionary steps. Qatar has advised tankers to wait outside the strait until loading can begin, while Japanese shipper Nippon Yusen KK has instructed its vessels to keep a safe distance from the Iranian coastline, according to Bloomberg.
The geopolitical volatility has spilled over into financial markets, with global stocks slipping and investors retreating into traditionally safe assets like gold and the US dollar. Gold ticked up to $3,372.36 an ounce, while the dollar strengthened against several major currencies, according to news agency Reuters.