Energy markets are facing a fresh wave of volatility as the conflict between Israel and Iran escalates. So far, global energy supplies have not been disrupted - something that sent oil markets into the red on Monday - but concerns remain that key infrastructure could face a hit.
Iran partially suspended gas production at its South Pars field after an attack from Israel on Saturday. However, that supply is consumed domestically. South Pars, which Iran shares with Qatar, is the world's largest gas field.
Israel has shut down its offshore Leviathan gas field as well as a precaution.
One area of focus is the Strait of Hormuz, which sees roughly 18 million to 19 million barrels per day of oil - or a fifth of the total world consumption - pass through.
Iran is a member of the Organization of the Petroleum Exporting Countries and produces some 3.3 million barrels per day of oil. It exports more than 2 million bpd of fuel and oil. An attack on Iranian oil output would require other producers in OPEC+ to produce more but leave very little cushion to deal with other disruptions.
Spare capacity of OPEC+ to produce more to offset a supply hit is about the equivalent of Iran's output. Saudi Arabia and the United Arab Emirates are the only OPEC+ members who can quickly boost supply, analysts have said.
The International Energy Agency on Friday said it was prepared to tap emergency oil stocks if markets experience shortages following the escalating conflict between Israel and Iran. This drew criticism from OPEC, which said such statements only create fear in the market.
The Group of Seven leaders are convening in Canada this week. German Chancellor Friedrich Merz said he hoped leaders could agree to help resolve the conflict in the Middle East. Iran, however, has told mediators in Qatar and Oman that it was not open to negotiating a ceasefire while under Israeli attack.
In other news, OPEC said on Monday it expected the global economy to remain solid for the second half of this year and trimmed its supply growth forecast for the United States and other producers outside of its group by 70,000 barrels per day.
Its monthly report, released on Monday, did not mention the Israel-Iran conflict. The group left its global oil demand growth forecast for 2025 and 2026 unchanged.
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