ENERGY: THE $200 QUESTION
The Hormuz crisis entered a more dangerous phase this week. Iran's military spokesperson Ebrahim Zolfaqari issued a stark warning: "Get ready for oil to be $200 a barrel..."
The Hormuz crisis entered a more dangerous phase this week. Iran's military spokesperson Ebrahim Zolfaqari issued a stark warning: "Get ready for oil to be $200 a barrel, because the oil price depends on regional security, which you have destabilised." The threat is not purely rhetorical. Three more ships were struck in the Persian Gulf overnight — a container vessel hit some 35 nautical miles north of Jebel Ali and two oil tankers set ablaze in Iraqi waters near Umm Qasr — bringing the confirmed total of commercial ships hit since the conflict began to fourteen.
Brent closed at $92.69 last week — the highest since October 2023 and up 27% weekly — while WTI surged 35.6%. Prices spiked to as high as $119 a barrel on Monday before easing. As of Thursday, Brent was trading around $97 a barrel, with traders shrugging off the IEA's push to release a record 400 million barrels of emergency oil reserves. The IEA's intervention — the largest coordinated strategic release in history — has yet to set a timeline, blunting its market impact.
Iran further warned that any vessels belonging to the US, Israel or their allies transiting the Strait of Hormuz would be considered legitimate targets. Trump suggested the campaign could end quickly, telling Axios there was "practically nothing left" to target in Iran — but on the ground, there is no sign ships can safely transit the strait, where roughly a fifth of global oil supply remains blockaded.
GCC: INFRASTRUCTURE UNDER PRESSURE
Bahrain, Iraq and Kuwait declared force majeure and announced oil output cuts; Qatar has halted LNG production. Iraq's southern oilfield output has fallen 70% to 1.3 million barrels per day, down from 4.3mn pre-war.
Aramco CEO Amin Nasser warned of "catastrophic consequences" for global oil markets, noting that current supply commitments are only being met by drawing on storage outside the Gulf — an arrangement that cannot hold indefinitely. Saudi's East-West Pipeline and UAE's Fujairah bypass remain the region's key release valves, though both are operating well below theoretical capacity.
An incident at an Amazon Web Services data centre has raised concerns over the physical and cyber security of regional data infrastructure. The UAE confirmed strategic reserves of essential goods covering roughly four to six months of domestic demand. The UAE Central Bank affirmed the banking sector remains well-positioned, backed by an AED 5.42 trillion asset base and high capital adequacy ratios.
Desalination infrastructure has emerged as a critical vulnerability — roughly 70% of Saudi Arabia's drinking water comes from desalination, rising to 90% in Kuwait. Attacks on this infrastructure represent a qualitative escalation beyond energy markets.
MARKETS & MACRO
Global equity markets bore the brunt of the escalation: the S&P 500 posted its largest weekly loss since mid-October, while the Stoxx 600 and MSCI Asia ex-Japan fell 5.5% and 6.3% respectively — the steepest drops in almost a year and six years. UAE's DFM and ADX fell 9.0% and 5.3% on the week. Saudi Arabia's Tadawul managed a slight gain on elevated energy prices.
On the macro side, US nonfarm payrolls unexpectedly fell 92,000 in February — the sixth decline since January 2025 — with the unemployment rate ticking up to 4.4%. The weaker dollar that followed cooled some safe-haven pressure, though the Swiss franc and USD remained the primary beneficiaries of geopolitical risk-off sentiment.
The IMF warned that a prolonged conflict could significantly lower regional GDP growth, with economies dependent on tourism, logistics and capital inflows most exposed. S&P flagged potential strain on GCC bank liquidity if risk premia remain elevated, while Fitch maintained that sovereign buffers and capital adequacy provide near-term resilience.
THE KEY VARIABLE
The current problem is not a shortage of oil but a lack of secure transportation — and that logistical problem, analysts argue, can only be resolved through adequate war risk insurance cover and policing of the strait. Whether diplomatic or military means deliver that outcome first is the question markets are pricing in real time. The selection of Mojtaba Khamenei as Iran's new supreme leader, given his hardline policy stance, is unlikely to accelerate any diplomatic breakthrough.
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