Oil Market Loses Its Safety Net as Iran Conflict Reignites

AI Summary

The global oil market faces increased vulnerability due to renewed conflict in the Middle East, particularly the closure of the Strait of Hormuz. The previous buffers that mitigated shocks to oil prices are no longer effective, raising concerns over future price spikes.

The global oil market is much more exposed to the latest re-escalation in the Middle East, as most of the buffers that cushioned the initial shock of the Iran war are wearing thin and unable to prevent the next oil price spike. For weeks, market participants were too complacent that the U.S.-Iran memorandum of understanding would reopen the Strait of Hormuz and the oil flows would recover steadily by the end of the third quarter. The reality dawned on the oil market last week, when the re-escalation all but closed the Strait of Hormuz, again, and…