China Chemical Industry News reports: Strait of Hormuz closure announced following sudden geopolitical incident; international oil prices surge in response.

On July 12, the Strait of Hormuz was declared closed following a sudden geopolitical incident, immediately plunging global energy markets into a state of high tension. During Asian trading hours on July 13, Brent crude futures jumped 3.2% to close at $78.46 per barrel, while West Texas Intermediate (WTI) crude rose 3.4% to $73.83 per barrel. Both contracts had already gained over 4% in the preceding week, climbing steadily from the $70-per-barrel range seen at the start of the month. Market panic spread rapidly; ICE gasoil futures surged nearly 5% in tandem, and the crack spread for Asian low-sulfur fuel oil widened to a year-to-date high.

Energy Infrastructure Attacked; No Substantial Disruption to Production

On July 12, in retaliation for earlier U.S. strikes on facilities belonging to Iran's Islamic Revolutionary Guard Corps (IRGC) near the Strait of Hormuz, Iran launched missile and drone attacks against five nations—Qatar, Bahrain, Kuwait, Oman, and Jordan—and subsequently announced the closure of the Strait of Hormuz. The attacks affected the world's largest liquefied natural gas (LNG) exporter and several countries situated along critical shipping lanes. Although physical damage was limited, the wide scope of the attacks significantly drove up risk premiums across the global energy supply chain, causing international oil prices to jump more than 3% during Asian trading hours that day.

Kuwait suffered the most severe damage to its energy infrastructure during the attacks. An offshore drilling platform operated by the Kuwait Petroleum Corporation was struck by a drone, injuring one worker; however, the impact of the damage on Kuwait's overall crude oil production remains negligible. No operational disruptions were reported at Qatar's Ras Laffan LNG export terminal or any of the country's other LNG export facilities. While Oman's Port of Duqm and the southern approaches to the Strait of Hormuz fell within the conflict zone, the country has not yet confirmed specific damage to facilities or released an assessment of losses. Overall, major refineries and LNG complexes in Gulf oil-producing nations remained unaffected, with no significant impact on production capacity; global oil exports continued to flow under heightened security measures.

Shipping Market Reacts Sharply: Voyage Times and Insurance Premiums Surge

The energy shipping market reacted strongly to the July 12 attack. Previously, Oman was considered the safest energy export route in the Gulf region because it lies outside the Strait of Hormuz; buyers had diverted cargoes to Omani ports, and India had specifically sought additional crude supplies from Oman to reduce its reliance on the Strait of Hormuz. However, the recent attacks on the Musandam and Al Wusta governorates have escalated regional risk, effectively bringing both the Port of Duqm and the shipping lanes south of the Strait of Hormuz into the conflict zone. An earlier drone attack on the Mina Al Fahal terminal had already caused delays in crude oil loading, and this latest incident further drove up shipping risk premiums.

The marine insurance market rapidly adjusted its risk assessments. London-based insurance brokers estimated that war risk surcharges for tankers traversing Gulf waters jumped from 0.5% of the vessel's value prior to the attacks to over 1.5%, adding approximately $500,000 in insurance costs for a single voyage of a Very Large Crude Carrier (VLCC). Rerouting vessels around the Cape of Good Hope would extend the voyage from the Middle East to Asia by about 15 days, adding roughly $2 million in fuel costs per vessel. These costs will ultimately be passed on to crude oil and refined product prices, further increasing procurement costs for Asian energy importers. The Baltic Exchange’s tanker freight rate index (for the TD3C route) surged by more than 40% in a single day following the attack, reflecting the market's rapid pricing of tight shipping capacity and route-related risks. Supply-Demand Imbalance Set to Worsen Significantly; Impact Ripples Rapidly Through Petrochemical Chain

The Strait of Hormuz handles approximately 20 million barrels of crude oil and petroleum products daily, accounting for 20% of global oil consumption and one-third of global seaborne oil trade. The vast majority of crude oil and liquefied natural gas (LNG) exports from Gulf producers—including Saudi Arabia, Iraq, Kuwait, the UAE, and Qatar—must pass through this waterway. On July 12, the day the strait was closed, the number of visible vessels passing through plummeted, with only a few small product tankers approaching the area. The Qatari government has urged all shipowners to "temporarily suspend" transit; shipping delays and capacity shortages are already rippling through global markets for refined products and chemical feedstocks.

International energy markets are closely monitoring the scale of security upgrades by Gulf nations, as well as shifts in long-term risk pricing reflected in shipping insurance rates and freight costs. Analysts at Wood Mackenzie note that this incident has caused a structural rise in the geopolitical risk premium embedded in oil prices; this extra premium is expected to remain at $3–$5 per barrel in the short term, and unless the situation escalates further, the market will gradually adapt to this new normal.

In its monthly report released on July 10, the International Energy Agency (IEA) had projected a year-on-year decline in global oil demand of 1 million barrels per day (bpd) and a supply reduction of 3.7 million bpd for 2026—marking the first annual demand contraction since 2020. That forecast was based on the assumption that transit through the strait would gradually resume. However, with the sudden closure of the strait, the IEA has warned that the crude oil supply-demand imbalance will worsen significantly. In a recent urgent assessment, Wood Mackenzie indicated that if the blockade persists for more than a month, global crude oil inventories would be depleted to critical levels within 45 days, and international oil prices could easily breach $120 per barrel.

The impact of the blockade is rapidly amplifying along the petrochemical value chain. Naphtha, a key feedstock for ethylene plants in Asia, relies heavily on supplies from the Middle East. Naphtha landed prices surged nearly 8% on July 13, with the prices of downstream monomers such as propylene and butadiene rising in tandem. Analysts at S&P Global Commodity Insights noted that if the strait closure persists, production costs for polyethylene and polypropylene in Asia will rise by more than 10%, and price pressures on end products—including plastic goods, synthetic rubber, and solvents—will ripple through the global manufacturing sector.

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