Middle East oil vulnerabilities have been exposed

The killing of Iran’s Supreme Leader Ayatollah Khamenei in US–Israeli strikes marks the most serious escalation in the region in decades and a bigger potential threat to the oil market than the start of the Russia-Ukraine crisis

The current Middle East conflict is an unprecedented structural market shock that could reshape the region’s energy and political relations indefinitely. The oil price risk premium of around $15/bl reflects a calculation that considers a relatively quick resolution on that transformative journey and one that could well end up as a net positive for the oil sector. But the level of disruption before that point could spiral out of control. Indeed, the oil market has entered a new phase in which supply security rather than spare capacity or production muscle has the greatest importance. Producing more barrels is futile if they cannot be shipped. OPEC+ has agreed to raise output by 206,000b/d, ef