U.S. Has Used Up Most Options to Soften the Oil Price Shock
The Trump Administration has already used up most emergency options to rein in the soaring international crude oil prices, which have pushed up U.S. gasoline prices by $0.80 per gallon from a month ago. The U.S. last week tapped the Strategic Petroleum Reserve (SPR) as part of a record-high reserves release announced by the International Energy Agency. The Trump Administration also issued a one-month waiver allowing buyers to purchase sanctioned Russian oil on tankers without repercussions. It also promised, two weeks ago, risk insurance and escort for tankers to help oil pass through the de facto closed Strait of Hormuz. The political risk insurance and guarantees for crossing the Strait of Hormuz, “at a very reasonable price” as U.S. President Donald Trump put it three days into the war, hasn’t materialized yet as shipowners and customers continue to steer clear of the world’s most critical oil route, if they aren’t already trapped there. Since President Trump’s claim that the U.S. would escort tankers through the Strait of Hormuz, if necessary, the Administration has retracted the statement, and the President ended up begging and bullying – often in the same Truth Social post – allies to help reopen the Strait. Despite the efforts of Saudi Arabia to redirect more crude flows to Red Sea exports and away from the Arab Gulf, the stark reality of global oil supply is that it needs the Strait of Hormuz open so it wouldn’t lose an estimated 17 million barrels per day (bpd) of crude and petroleum products this month and next. These volumes cannot be offset by any SPR release or other similar band-aid solution as the strain on the oil and product markets is already too high with just over two weeks of war. Analysts warn that if the Strait of Hormuz remains blocked for a month or two, oil prices could jump to as high as $150 and even $200 per barrel, forcing an economic shock and a massive political shock to incumbent leaders, most of all President Trump ahead of the mid-term elections in November. Band-Aid The President has few options left to contain the fallout, according to Reuters columnist Ron Bousso. These could include considering waiving the Jones Act to allow non-U.S. vessels to move goods, including energy, from one American port to another, and a Congressional move to reduce federal taxes on gasoline and diesel. Yet, these, too, would be a band-aid trying to stop economic and political bleeding from a closed Strait of Hormuz. “I don’t see this as much more than a band-aid with weak adhesive,” Steve Allen, an economist at North Carolina State University, told ABC News, in comments on the U.S. tapping the SPR for a release of 172 million barrels of crude as part of the IEA’s record-high 400-million stocks release. To put into perspective this massive coordinated global release of oil stocks, the biggest in the history of the oil market, it’s worth noting that before the war cut off the Strait of Hormuz from the global oil supply chain, about 600 million barrels of oil were passing through the chokepoint per month. Strait of Hormuz Shock The loss of oil supply cannot be overstated, and the loss of flows through Hormuz cannot be compensated by any bypassing or workarounds from Saudi Arabia to the Yanbu terminal on the Red Sea, or the UAE pipeline to Fujairah outside the Strait of Hormuz. “All of those routes together can only restore flows to roughly half of the pre-war oil exports from the Gulf,” analysts at Wood Mackenzie say. Andrew Harbourne, Wood Mackenzie’s senior analyst for oil markets, notes the 400-million-barrel release will cover only about four weeks of disruption in the Gulf. “Strategic stocks remain an effective emergency buffer, but they are a one-off intervention that must eventually be rebuilt and cannot cover a sustained supply gap,” Harbourne added. Supply shocks in the past suggest that if the war and the disruption in the Strait of Hormuz persist, Brent crude could get to $150 to $200 per barrel. For some, such as diesel and jet fuel, the effective prices could be $200 to $250 a barrel or more, according to WoodMac. Spiking prices would present a macroeconomic and political risk in many geographies and countries, according to J.P. Morgan. “This event generates greater macroeconomic risk than recent military conflicts,” Joseph Lupton, co-head of Economic Research at J.P. Morgan, said on Friday. “Through its potential to disrupt global energy markets and supply chains, it looks likely to have material, lasting political and economic consequences at the regional level.” How fast the U.S. could rally a coalition to try to unblock the Strait of Hormuz – and how successful such would be – would be critical for the political and economic shocks going forward. “Until we see a meaningful resumption of oil flows through the Strait of Hormuz, upward pressure on fuel prices is likely to persist,” Patrick De Haan, head of petroleum analysis at GasBuddy, said on Monday, as U.S. gasoline and diesel prices continued to soar, with diesel topping $5 per gallon.
Nanda Devi LPG tanker arrived at Vadinar
After Indian LPG carrier ‘Shivalik’ reached India, another LPG tanker, ‘Nanda Devi’, carrying about 46,000 metric tonnes of liquefied petroleum gas, has reached the Vadinar Port in Gujarat . Chief Officer of Nanda Devi vessel said that the initiative was taken by the Ministry of Ports, Shipping and Waterways and Shipping Corporation of India, with the Indian and Iranian navies providing the necessary assistance to cross the Strait of Hormuz. He added that the 46,000 metric tonnes of LPG will help India in a time of worldwide crisis due to conflict in West Asia. “I would like to thank everyone who was involved in this operation of crossing the Strait of Hormuz. The initiative was taken by the Indian Ministry, Shipping Corporation of India, with the help of the Indian Navy and the Iranian Navy. Vessel transmitted the Hormuz safely, now it is enroute to Kandla, Gujarat and will be serving a huge amount of LPG, 46,000 metric tonnes. This will help in the worldwide crisis of LPG. We will continue to serve the LPG in future also,” he said.
India Reports 38% Increase in Domestic LPG Production
India has achieved a significant milestone in its energy sector with domestic liquefied petroleum gas (LPG) production recording a substantial increase of 38%, according to a government official announcement. Production Growth AchievementThe reported 38% increase in domestic LPG production represents a major development in India’s energy landscape. This growth indicates enhanced production capacity and improved operational efficiency across the country’s LPG manufacturing facilities.
Gas on the line: will the Iran war squeeze India’s piped gas next?
The Iran war has already rattled India’s liquefied petroleum gas (LPG) market. Now another energy artery is under scrutiny: the country’s rapidly expanding network of piped natural gas (PNG) – gas delivered by pipeline to homes and businesses. Demand for this natural gas comes from fertiliser plants, industry and gas-fired power, as well as city gas networks – which supply PNG to households and CNG (compressed natural gas) to vehicles. Of these, city gas to homes is the standout grower, expanding steadily as the network spreads across urban India. That push is mirrored on the ground: India now has more than 15 million PNG connections, a number rising fast as policymakers nudge households to swap cylinders for gas on tap. War on Iran squeezes India’s cooking-gas supplies At the same time, demand from CNG vehicles has also climbed steadily, with CNG now India’s second-largest auto fuel after petrol. If tankers carrying LPG struggle to pass through the Strait of Hormuz, the question in many urban Indian homes is simple – could the gas in their kitchen pipelines be next to feel the squeeze? Probably not – at least not immediately. India’s piped gas supply is a blend of domestic production and imports of liquefied natural gas (LNG). About half of India’s PNG supply is domestic gas drilled from onshore and offshore fields – for example by companies such as ONGC and Reliance. The balance is met through LNG imports. “No disruption is expected for homes and vehicles [using piped gas]. The government has given priority to these two sectors,” says Rahul Chopra, managing director for the Haryana City Gas Distribution Limited, a countrywide gas company with around 100,000 domestic consumers and 195 CNG fuel stations.
India fuel retailers seek advance payments from dealers as global price surges
Indian three major state-run oil marketing companies, Indian Oil Corporation (IOCL), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) have suspended fuel supplies on credit to retail outlets and are now asking for advance payments, according to a report by Mint. HPCL and BPCL began insisting on upfront payments from last week, while IOCL halted its five-day revolving credit policy on Monday, the report said. Together, the three companies supply fuel to the majority of India’s nearly 100,000 petrol pumps. The trigger for this tightening is the closure of the Strait of Hormuz, which has choked off around 40% of crude supplies to India. India is the world’s third-largest oil consumer, with petro-product demand expected to reach 250.8 million tonnes in financial year 2027. Earlier, these companies offered credit lines stretching for a few days. Fuel outlets told Mint that two common credit facilities, the draft on delivery and revolving credit, have both been halted. Under the draft on delivery system, dealers pay at the end of each day for fuel purchased earlier that day. Meanwhile, under the revolving credit model, pumps receive fuel on credit for three to five days and pay on the sixth day. A third facility, electronic dealer finance, where a bank issues a letter of comfort to the OMC on behalf of the outlet for 15 to 30 days, is still continuing for now, the report added.
Why India Faces LPG Shortage but No Petrol or Diesel Crisis Explained
India is facing pressure in LPG supply due to disruptions around the Strait of Hormuz, a key global shipping route. However, despite these geopolitical tensions, the country is not experiencing shortages of petrol or diesel. At first glance, this may seem puzzling. All these fuels originate from crude oil, so why is only LPG affected? The answer lies in how these fuels are produced, imported, stored and distributed in India’s energy system. Petrol and diesel are largely produced domestically through India’s large refining network. LPG, on the other hand, depends much more on direct imports and has a relatively small storage buffer. Because of these structural differences, LPG supply becomes more vulnerable when global shipping routes face disruptions. Why Petrol and Diesel Supply Remains Stable Petrol and diesel supply remains stable in India because of the country’s strong refining infrastructure. India operates 23 crude oil refineries with a total refining capacity of about 248–256 million tonnes per year. These refineries process over 220 million tonnes of crude oil annually, converting imported crude into fuels such as petrol, diesel and aviation fuel within the country. Another important factor is diversification of crude oil sources. India imports crude from multiple regions rather than relying on a single supplier. This reduces the risk of supply disruptions affecting fuel availability across the country. Additionally, crude oil inventories and refinery storage provide a buffer. Even if shipments are temporarily disrupted, refineries can continue processing stored crude oil and keep petrol pumps supplied. Because petrol and diesel are produced domestically from imported crude oil, their supply chain is more resilient during global disruptions.
GAIL to Invest ₹120 Billion in Pipeline and LNG Infrastructure
GAIL (India) Limited, entered a phase of accelerated expansion, significantly strengthening India’s gas infrastructure. The company commissioned nearly 3,000 kilometres of new natural gas pipelines, expanding its national gas grid and improving connectivity across key industrial regions. The infrastructure push forms part of GAIL’s broader strategy to strengthen its liquefied natural gas (LNG) portfolio, expand petrochemical operations, and invest in green energy initiatives to support India’s evolving energy landscape. Pipeline Network Crosses 17,000 km The expansion has increased GAIL’s total pipeline network to around 17,000 kilometres, marking nearly 20% growth in grid length within the past year. This rapid expansion highlights the company’s focus on strengthening the country’s natural gas transportation capacity. One of the most significant milestones is the commissioning of the 694-km Mumbai–Nagpur stretch of the Mumbai–Nagpur–Jharsuguda Pipeline (MNJPL). The project represents an engineering milestone, as it integrates a high-capacity gas pipeline within the utility corridor of the Samruddhi Mahamarg Expressway in Maharashtra. Notably, the development was executed under the PM GatiShakti framework, which promotes coordinated infrastructure development across sectors.
What Happens If Gulf Producers Deploy ‘Nuclear Option’ To End Middle East War?
The shutdown of commercial traffic through the Strait of Hormuz has suddenly handed Gulf oil producers enormous leverage over the escalating Middle East war. With roughly 15 million barrels per day of crude exports effectively stranded, Gulf Cooperation Council (GCC) nations could deploy what amounts to an energy “nuclear option”: declaring force majeure across their oil and gas exports and deliberately removing another 20% of global supply from the market. Such a move, unpacked in an opinion piece in Middle East Eye, would instantly trigger a global economic shock and could force the United States and Israel to reassess their military campaign against Iran. Over the weekend, the Strait of Hormuz effectively stopped functioning as a commercial shipping route. According to vessel tracking data, zero commercial crossings were recorded on Saturday–down from roughly 2.6 crossings per day since the war began and about 135 daily crossings before the conflict. The disruption has prompted emergency diplomatic discussions in Europe, where foreign ministers are meeting Monday to consider naval escorts for tankers attempting to transit the waterway. The de facto closure of the passage has resulted in severe economic losses for GCC countries, with estimates that approximately 14.8 million barrels of oil produced by GCC nations every day are left stranded without a viable export route. Collectively, these countries could be losing up to $1.2 billion in export revenues per day, and are estimated to have lost more than $15 billion in oil and natural gas revenues since the conflict began. The GCC includes Saudi Arabia, UAE, Qatar, Kuwait, Oman, and Bahrain. Gulf producers could be willing to bet that cutting off another 20% of the world’s oil supply could force the U.S. and Israel to stop attacks on Iran. After all, there’s little incentive at the moment for the two to stop the war, with Israel relying on its deep-pocketed ally to finance operations while Trump has repeatedly stated he is “not ready to declare victory” or accept current negotiation terms. A collective halt of oil exports would trigger a major global economic shock and instantly shift the balance of power to Gulf producers, compelling the warring nations to immediately reassess their positions. The GCC has a clear justification for declaring force majeure. Saudi Aramco’s 550,000 bpd Ras Tanura refinery was shut down following a drone attack attributed to Iran on March 2. Two Iranian drones were intercepted by Saudi air defenses; however, falling debris ignited a fire at the giant facility. While the fire was quickly contained and caused only minor damage, Saudi Arabia is still bearing the full brunt of the war, with OPEC’s largest producer estimated to have lost nearly $5 billion in potential revenues so far. Meanwhile, Qatar has already declared force majeure on its LNG operations. On March 2, QatarEnergy halted liquefied natural gas (LNG) production at its major Ras Laffan and Mesaieed industrial cities following Iranian drone attacks, effectively cutting off a fifth of global LNG supply. Qatar’s Ras Laffan Industrial City serves as the primary hub for the country’s massive LNG operations and is home to the world’s LNG export complex. The city’s LNG plant features 14 LNG trains with a production capacity of approximately 77 million metric tonnes per year (mtpa). Thankfully, most GCC nations have the necessary wherewithal to pull off such a drastic move thanks to their massive sovereign wealth funds. GCC SWFs are some of the largest in the world, managing approximately $5 trillion in assets, or nearly 40% of global SWF assets. Saudi Arabia’s Public Investment Fund (PIF) is the fifth-largest sovereign wealth fund in the world with ~$1.2 billion in assets. By mid-2025, the PIF’s assets surpassed SAR 4.3 trillion ($1.15 trillion), marking a significant increase from 2024, aided by transfers of Aramco stakes and portfolio performance. Approximately 80% of the PIF’s investments are focused within Saudi Arabia to drive Vision 2030 goals, with 55% of the portfolio allocated to alternative assets. Meanwhile, Abu Dhabi Investment Authority (ADIA) manages ~ $1.1 trillion in assets while Kuwait Investment Authority (KIA), the world’s oldest sovereign wealth fund, manages over $1 trillion. Saudi Arabia and its Gulf neighbors would normally be among the biggest beneficiaries of a sharp oil rally. Brent’s surge above $100 per barrel dramatically improves fiscal revenues for producers that rely heavily on crude exports to fund government spending and large-scale development programs. Riyadh in particular has spent years pushing for higher oil prices to support its ambitious Vision 2030 economic transformation plan. But the current crisis has created a far more complicated equation. With the Strait of Hormuz effectively shut and millions of barrels of Gulf crude unable to reach global markets, the price spike offers only limited relief if producers cannot physically move their oil. GCC nations could be in a world of pain unless the Middle East conflict is quickly resolved, with estimates that Gulf GDP could drop by as much as 22% if the conflict carries on for 3-6 months. While Gulf states possess significant sovereign wealth funds to mitigate short-term impacts, prolonged closure is expected to cause severe fiscal pressure and widen their current account deficits.
US Crude Oil Inventories Sag As Iran War Bolsters Prices
The American Petroleum Institute (API) estimated that crude oil inventories in the United States fell by 1.7 million barrels in the week ending March 6, after adding 5.6 million barrels in the week prior. Analysts had expected a build of 1.4 million barrels. Inventories in the US Strategic Petroleum Reserve (SPR) have stayed at 415.4 million barrels for multiple weeks in a row as of the week ending March 6. This is 310.1 million barrels shy of maximum capacity. US production fell again, by 6,000 bpd, sinking to an average of 13.696 million bpd for week ending February 27, according to the latest EIA data. This is 188,000 bpd more than this same time last year. At 4:23 pm ET, Brent crude was trading down sharply on the day at $91.02 (-8.02%). Brent is still up roughly 11 per barrel up from this time last week with stalled tanker traffic in the Strait of Hormuz and large production losses in Iraq. WTI was also trading down on the day, by $8.03 per barrel (-8.47%) at $86.74. Gasoline inventories also fell this week, shrinking by 1.8 million barrels in the week ending March 6. In the week prior, gasoline inventories fell by 3.3 million barrels. As of last week, gasoline inventories were 4% above the five-year average for this time of year, according to the latest EIA data. Related: Little-Known US Company Lands Important Pentagon Contract in Rare Earth Race Distillate inventories sank by 2.3 million barrels, after increasing by 516,000 barrels in the week prior. Distillate inventories were 3% below the five-year average as of the week ending February 27, the latest EIA data shows. Cushing inventory—the inventory kept at the delivery hub for the WTI Crude futures contract—rounded out the inventory losses this week with a 370,000-barrel dip.
As oil surged, another commodity quietly caught fire in Iran war
Global attention has largely focused on the surge in oil and gas prices following the US-Israeli war against Iran. But another commodity is quietly becoming one of the biggest casualties of the conflict — aluminium. Prices of the metal have surged to four-year highs as the effective shutdown of the Strait of Hormuz disrupts trade flows from the Gulf, a region that has become a critical supplier to Western markets. Benchmark aluminium on the London Metal Exchange briefly touched $3,544 a metric ton on Monday, the highest level since March 2022, before easing slightly to around $3,394 a ton, according to Reuters. The rally reflects mounting concerns that prolonged shipping disruptions could choke off supply in a market that was already tightening before the conflict began. The crisis highlights how geopolitical shocks in the Middle East can reverberate far beyond energy markets, rippling through global industrial supply chains that rely heavily on Gulf aluminium exports. Aluminium faces squeeze The Strait of Hormuz is one of the world’s most critical maritime passages. While it is widely known as a conduit for oil and liquefied natural gas, it also plays a crucial role in the global aluminium trade. According to the International Aluminium Institute, the Gulf region accounted for more than 8 percent of global aluminium output last year. Over 5 million metric tons of metal produced in Bahrain, Qatar, Saudi Arabia and the United Arab Emirates are shipped annually through the strait to customers in Europe and the United States. The escalating war has now effectively shut that corridor. Reuters reported that the conflict has virtually shut the Strait of Hormuz for aluminium shipments, cutting off exports of the metal while also blocking imports of key raw materials needed to sustain production. The disruption is particularly severe because Gulf smelters depend heavily on imported bauxite and alumina, the raw materials used to produce aluminium. Ships carrying these materials have already begun diverting from their original routes. Vessel-tracking data cited by Reuters shows multiple bulk carriers that were heading toward the United Arab Emirates changing course toward Asia after the strait became impassable. The aluminium supply chain operates in tightly linked stages. Bauxite ore is refined into alumina, which is then smelted into aluminium used in industries ranging from transport and construction to packaging. The current shipping disruption threatens all three stages simultaneously. Reuters reported that three large vessels carrying bauxite, with a combined cargo of about 371,000 metric tons, have diverted away from the Gulf after approaching the region. Another vessel transporting Australian bauxite that was originally headed to the Gulf is now bound for China instead. Two ships carrying alumina destined for Bahrain also appear to be changing course. The disruption means that Gulf smelters cannot easily export finished aluminium while also struggling to import the raw materials needed to maintain production. ING analysts warned that this dual squeeze could quickly translate into supply losses if the conflict persists. “Extended disruption in the Strait would simultaneously choke alumina inflows and aluminium exports for Middle Eastern smelters,” ING said in a note on March 6, adding that such a scenario would “tighten global supply meaningfully.” On Tuesday, Qatari smelter Qatalum began to shut down. Shareholder Norsk Hydro issued a force majeure to customers. “The decision to shut down was made after the company’s gas supplier informed it of a forthcoming suspension of its gas supply,” Hydro, which holds 50% of the Qatalum joint venture, said in a statement. QatarEnergy, which owns 51% in the other Qatalum shareholder, Qatar Aluminum Manufacturing Co, had earlier said it was halting production of some downstream products, including aluminium, a day after suspending liquefied natural gas production due to Iranian drone attacks. Hydro said the shutdown of the 648,000 metric ton per year smelter was expected to be completed by the end of March and that a full restart could take six-to-12 months.