The extension of a ceasefire involving the United States and Iran has not restored normal oil and gas movements through the Strait of Hormuz, Barclays said in a client note, leaving physical markets tightly constrained and energy prices at risk of a sharper rise.
Analyst Lydia Rainforth told clients that the waterway has been closed to oil and gas flows for in excess of 50 days, amounting to more than 600 million barrels blocked and in excess of 10 million barrels per day shut in. Barclays said the situation has been compounded by what it described as a continued U.S. blockade of Iranian ports, which has prevented normal passage from the Iran side - "limited to no passage being allowed from the Iran side either," the bank noted.
Security concerns in the Persian Gulf have also left crews and vessels vulnerable. Barclays estimates some 20,000 seafarers remain stranded aboard ships inside the Gulf and said vessels continue to face direct threats. The bank highlighted a recent incident in which a container ship was reportedly fired upon by an Iranian Revolutionary Guard Corps gunboat and suffered heavy damage to its bridge.
UAE Minister of Industry and ADNOC chief Dr. Sultan Al Jaber urged for safe transit through the strait, saying, "Hormuz belongs to the world. It must be returned to the world." His comments add to concerns voiced by market participants about restricted movement through a key chokepoint for global oil flows.
Barclays believes that markets have not yet fully priced in the scale of the disruption. The bank said oil equities appear to be valuing a long-run oil price of around $60 to $65 per barrel and advised investors to "take advantage of recent weakness to build positions" ahead of what it expects will be higher oil prices in the coming months.
Context and market implications
- Physical tightness in oil markets is being driven by prolonged closure of a major transit route and restrictions on passage from the Iranian side.
- Shipping operations face heightened security risks and a significant number of seafarers remain aboard vessels in the region.
- Barclays sees potential upside for oil prices and recommends accumulating energy equities that it views as discounting a lower long-run price level.