Posthaste: Energy faces biggest crisis in decades as Iran conflict threatens ‘world’s most critical oil chokepoint’

Oil surged

the most in four years today with analysts predicting it could top US$100 a barrel as the conflict that blew up in the Middle East over the weekend threatens the biggest crisis for energy markets in decades.

At stake is “the world’s most critical oil chokepoint,” a channel of water partly

controlled by Iran

through which 20 per cent of the global oil supply is shipped.

Saturday, the United States and Israel launched military strikes on Iran and the killing of Iranian Supreme Leader Ayatollah Ali Khamenei has escalated the situation, with Iran striking back at U.S. allies around the region.

“Gulf energy infrastructure is now squarely in Iran’s sights,” Torbjorn Soltvedt, principal Middle East analyst at risk intelligence company Verisk Maplecroft, told the Financial Times.

One of Saudi Arabia’s largest oil refineries was shut down after a drone attack in the area and the world’s biggest liquefied natural gas plant in Qatar was also targeted.

The fourth largest

oil producer in OPEC

, Iran pumps about 3.3 million barrels a day, or 3 per cent of global output, but the bigger problem for global oil supplies is its strategic position.

The country sits on one side of the

Strait of Hormuz

, the shipping lane through which close to 30 per cent of global seaborne crude passes from key suppliers including Saudi Arabia and Iraq, said Rystad Energy.

“Any sustained disruption, formal or de facto, would remove a substantial portion of globally traded crude from the market,” said the energy analysts.

Iran has warned shipping away from the waterway and after reported attacks on three ships, the strait is effectively “closed,” said Capital Economics.

Insurers have withdrawn coverage halting tanker traffic, and S&P Global Energy has stopped accepting bids that help set the price for the Dubai regional benchmark.

The move is an admission that, in this unprecedented situation, the physical “Arab-Gulf market has become unhinged and rudderless,” John Driscoll, chief strategist at JTD Energy Services told Bloomberg.

Even without “official closure,” Iran can make shipping difficult by attacking or detaining ships, jamming the GPS signals of tankers impeding navigation or mining the passage.

Alan Gelder, SVP of refining, chemicals and oil markets at Wood Mackenzie, said tanker rates and insurance costs will increase dramatically, but that will only be a small part of the impact if the conflict lasts for more than a few days.

And it might. U.S. President

Donald Trump

said the bombing campaign against Iran could last for weeks and the Islamic Republic’s security chief has so far ruled out negotiations.

In the most optimistic scenario it could take a few weeks for export flows to resume, given the uncertainty around events, said Gelder.

“During that time, oil prices are heavily risked to the upside,” he said. “The most recent comparison is during the early days of the Russia/Ukraine conflict, when the fear of loss of Russian supplies drove the oil price to over US$125/bbl.”

At the open today

U.S. crude

jumped more than 10 per cent to over US$75 a barrel and Brent hit US$78.

In response to the crisis, OPEC nations agreed over the weekend to increase production by 260,000 barrels a day, but analysts say the gesture is moot if shipments can’t make it through the Strait of Hormuz.

“The disruption creates a dual supply shock: not only are current exports through the Strait halted, but OPEC+ additional volumes and ultimately most of OPEC’s spare capacity — typically a key lever for balancing the global oil market — are inaccessible while the waterway remains closed,” said Wood Mackenzie.

The crisis is equally disruptive to the global gas market as almost 20 per cent of the

world’s LNG supply

was shipped through the strait in 2025, mostly from Qatar, said the analysts.

The halt of LNG supplies through this route would be comparable to the curtailment of Russian supplies to Europe at the onset of the Ukraine invasion which sent prices soaring.

European natural gas prices jumped as much 28 per cent this morning.

Wood Mackenzie said the nearest historical comparison to today’s situation would be the Middle East oil embargo of the 1970s which increased oil prices by 300 per cent.

However, the shock to the economy will be less because “the global economy is far less oil intensive than it was 50 years ago,” said Gelder.

• Saudis pulled deeper into Middle East war after refinery attack
• What’s at stake for oil markets as Trump strikes Iran

Crush your taxes: A live Q&A with Jamie Golombek from the Financial Post

Tax season is in full swing and we know you have questions. That’s why we’re giving Financial Post readers a chance to put them to our expert tax columnist, CIBC’s Jamie Golombek, who will answer as many as he can live on March 5 at noon ET. Send in your questions to

wealth@postmedia.com

and register

here

to tune in live. Readers will also have the opportunity to submit questions during the event.

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Canada’s economy in 2025 grew at the slowest pace since the economy shrank in the depths of the pandemic, data showed Friday.

Gross domestic product

contracted by 0.6 per cent annualized in the fourth quarter, missing the

Bank of Canada’s

expectations.

That put growth for the year at 1.7 per cent, the worst performance since 2020.

• Prime Minister Mark Carney continues his travels today. He began his trip to promote Canada’s economic ties by flying to India and landing in Mumbai before heading to New Delhi. Carney will also visit Australia this week with stops in both Sydney and Canberra before heading to Tokyo on Friday.
• Earnings: Capstone Copper Corp., Vizsla Silver Corp.

• Canada’s SPAC ‘debacle’: How a shortcut to market has spelled trouble for companies and investors
• The (high) opportunity cost of paying off your mortgage early
  
• Mark’s disability payments end soon and his CPP payments will be reduced. What can he do?

As you start to organize your tax slips, receipts and other tax information to begin preparing your 2025 personal tax return, you’ll want to ensure you have all the details of any foreign property you held last year, advises tax expert Jamie Golombek.

Foreign property can include a bank or investment account in another country, but also shares of widely-held U.S. corporations such as Apple Inc. or Nvidia Corp. if held in a non-registered account. If the total amount is more than $100,000, the property must be disclosed in a T1135.

But be sure to file on time or you could end up like one taxpayer in a recent tax case, on

the hook to the CRA

for $4,500 in penalties and interest.

Find out more 

Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country’s most important sectors.

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McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s

Financial Post column

can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his

mortgage rate page

for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s

YouTube channel

for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at 

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• Saudis pulled deeper into Middle East war after refinery attack
• What’s at stake for oil markets as Trump strikes Iran

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