Three conflicts put a quarter of global oil flows at risk
Disruptions across Hormuz, the Red Sea and Black Sea are squeezing crude and fuel supplies as global emergency reserves fall to decades-old lows
- Three simultaneous conflicts are threatening key energy shipping routes: the Strait of Hormuz, the Red Sea's Bab el-Mandeb strait, and Russia's Black Sea oil infrastructure.
- Together, these three affected routes account for roughly a quarter of the world's total oil flows, creating significant risk for crude and refined fuel markets.
- The disruptions are impacting refined fuels like diesel and petrol more severely than crude oil, due to attacks on Russian refineries and fewer alternative transport options for these products.
- This supply risk is amplified by the fact that emergency oil reserves in the United States and other advanced economies are near their lowest levels in decades.
Global energy supplies are being squeezed across three major shipping fronts, with conflicts threatening the Strait of Hormuz, the Red Sea route through Bab el-Mandeb and Russia’s Black Sea oil infrastructure at the same time.
Together, the affected routes account for roughly a quarter of global oil flows, exposing crude and refined-fuel markets to disruptions just as emergency reserves in the United States and other advanced economies stand near their lowest levels in decades.
The pressure intensified after Yemen’s Iran-backed Houthi movement attacked Saudi tankers in the Red Sea and threatened maritime traffic near Bab el-Mandeb. The route had become increasingly important to Saudi Arabia as an alternative to the Strait of Hormuz.
Tankers have been forced to reconsider journeys through the southern Red Sea, which normally carries about 12% of seaborne oil trade. Ships avoiding the route may have to sail around Africa, adding time, freight charges and war-risk insurance costs.
Black Sea attacks hit Russian energy exports
The Russia-Ukraine war has also spread deeper into the energy sector, with Ukrainian drones repeatedly targeting Russian oil ports, refineries and other infrastructure around the Black Sea.
Operations at Novorossiysk, which handles a substantial share of Russia’s oil exports and also serves crude shipments from Kazakhstan, have faced intermittent disruption.
The attacks have affected more than crude exports. Russian refining rates averaged about 3.91 million barrels a day in July, their lowest level since March 2005 and more than 1.4 million barrels a day below the level recorded a year earlier, according to EA Analytics data.
Russia subsequently restricted most diesel exports until the end of July, adding to earlier limits on petrol and aviation-fuel shipments. Before the conflict, Russia accounted for about 11% of internationally traded diesel.
Refined fuels become the tighter market
The disruption is increasingly affecting diesel, petrol and aviation fuel more severely than crude oil.
Some Middle Eastern producers can bypass Hormuz by moving crude through pipelines to terminals on the Red Sea or Gulf of Oman. Refined products have fewer alternative routes, leaving fuel exports more exposed to any prolonged disruption at the strait.
Russian refinery damage has further reduced global processing capacity. Analysts have estimated that Ukrainian attacks may have removed between 20% and 40% of Russia’s refining capability at different points during the conflict.
The gap between crude and refined-product prices has consequently widened to multi-year highs. The shortage is no longer solely about access to crude oil, but also about whether sufficient refinery capacity remains available to turn it into usable fuels.
The International Energy Agency reported that refined-product margins reached four-year highs in early July, with Middle Eastern export refineries yet to restart fully and Russian processing curtailed by attacks.
Emergency reserves offer a thinner buffer
The global supply shock comes after governments drew heavily on emergency oil stocks during earlier phases of the conflict.
The US Strategic Petroleum Reserve fell to 311.4 million barrels in the week ending July 17, its lowest level since March 1983. It has declined by more than 100 million barrels since the conflict involving the United States, Israel and Iran began in late February.
US commercial crude inventories rose by 2 million barrels to 411.7 million barrels during the same week, but remained 6% below their five-year seasonal average.
Across the Organisation for Economic Co-operation and Development, total oil stocks fell by another 62 million barrels in June. Government stock releases accounted for an estimated 44 million barrels of that decline, after official reserves had already fallen to their lowest level since December 1990.
The immediate risk is therefore not confined to one conflict or one shipping lane. Simultaneous disruption in the Middle East, Red Sea and Black Sea could restrict crude exports, reduce refinery output and raise transport costs while leaving governments with less reserve capacity to protect consumers from another prolonged energy shock.
