GLOBAL energy markets and regional credit channels have been thrown into severe turmoil following the effective closure of the Strait of Hormuz, a critical chokepoint for approximately 20 per cent of the world’s seaborne oil and LNG.
A new commodities update from Emirates NBD Research and a bulletin from S&P Global Ratings both warn that the waterway is now “shut in commercial terms” as vessels avoid the area following the start of a US-Israel air war against Iran on February 28, 2026.
The disruption has sent immediate shockwaves through energy pricing, with Brent futures pushing past $80/b as of March 3, 2026, marking an 11 per cent increase since the conflict began.
During the same period, European gasoil rose nearly 28 per cent to $962 per tonne, and European natural gas futures skyrocketed by almost 67 per cent to 53.37 euros per MWh.
Shipping logistics are equally strained, as costs for Middle East to China ‘dirty tankers’ have spiked to over $50 per metric tonne.
S&P Global Ratings has moved its situation assessment from “high” to “severe,” noting that military objectives in this conflict are far broader than previous hostilities. Iranian forces are expected to target not just shipping, but also regional airports, ports, and critical infrastructure.
This is already a reality for production sites; Saudi Arabia’s Ras Tanura refinery has ceased operations after coming under attack, and Qatar’s Ras Laffan LNG terminal has suspended production while the strait remains blocked.
The credit impact is vibrating across multiple sectors:
Banking: External capital outflow risks have increased, with Bahraini and Qatari systems identified as most vulnerable due to large net external debt positions.
Energy: While higher prices offer short-term budget relief for some GCC states, prolonged obstructions could lead to fiscal strain through weakened export volumes.
Corporates and Real Estate: Companies managing high-value assets face physical and cyber risks, while the real estate sector prepares for slower transaction volumes and softer pricing as investor sentiment deteriorates.
Geographic location is now the primary factor for sovereign risk, with Iraq, Bahrain, Qatar, and Kuwait facing the highest exposure due to their heavy reliance on the Strait.
Conversely, Oman can utilise export facilities in Sohar and Duqm that avoid the chokepoint entirely. Saudi Arabia and the UAE can also partially mitigate the impact via pipeline alternatives, such as the 5m bpd East-West Pipeline to Yanbu and the 1.8m bpd Abu Dhabi Crude Oil Pipeline to Fujairah.
However, these can only bypass a portion of total volumes, and crucially, no similar alternative exists for LNG to shift to piped gas.
In response to the shifting fundamental picture, Emirates NBD has raised its Q1 2026 average forecasts to $70 pb for Brent and $66 pb for WTI, assuming the conflict persists through March in line with US President Trump’s “four to five weeks” estimate.
While S&P’s base-case remains that the confrontation will be relatively short-lived, the agency cautions that because the Iranian regime views the conflict as “near existential,” the likelihood of continued retaliation against military and civilian assets remains high.
“The effective shutting of the Strait of Hormuz is a change in the fundamental picture for energy exports from the GCC and will support prices at an elevated level,” said Edward Bell, acting chief economist at Emirates NBD.
avinash@gdnmedia.bh
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