Energy: The Strait Paradox

The Strait of Hormuz crisis is regionalising energy markets and keeping oil, gas and refined-product prices vulnerable despite recovering transit volumes.

• Middle Eastern transit volumes have recovered, yet Dated Brent remains near its year-to-date high at $127/bbl and December Brent futures trade at $115/bbl, reflecting concerns over supply risks and depleted inventories.
• October skirmishes averaged more than one per day, while onshore inventories reached their lowest level since 2016 and VLCC freight from the Middle East to China rose to about $35/bbl from $1–3/bbl over the past five years.
• Brent benefits from short supply routes to Rotterdam, while US WTI and Kazakhstan’s CPC Blend face an additional $10–15/bbl transport cost; Middle Eastern exports have recovered to around 10% of pre-conflict levels.
• LNG exports have recovered from 5% of their January level to about 30%, but damage at Qatar’s Ras Laffan plant leaves Europe’s storage only 64% full on 17 October and pushes December TTF gas to €97/MWh.
• Refined-product exports are running at half their early-year level, while Russian and Middle Eastern supply losses total 1.3 million barrels per day and the IEA expects diesel markets to remain abnormal until the second half of 2027.
• TotalEnergies has $30 billion of capital employed in Integrated Power, and its chief executive expects geopolitical price signals to accelerate electrification; 12-month Brent has risen to $87/bbl from $70 in July.

Takeaway: Investors should expect persistent energy-market fragmentation and greater spending opportunities in generation, transmission and storage, while recognising that colder weather or renewed Gulf export disruptions could intensify European price risks.