Trump calls again for help in Hormuz as Israel joins Iran in war on Asia’s energy supply

(Originally published March 19 in “What in the World“) Oil prices continued climbing after Israel attacked the world’s largest natural gas field.

Following the attack on the South Pars field, which is shared by Iran and Qatar, Iran apparently attacked Qatar’s Ras Laffan Industrial City, the world’s largest liquefied natural gas facility. Saudi Arabia said it has intercepted a drone attack on a gas facility in its east, as well as four ballistic missiles headed for Riyadh. Trump threatened to launch an even larger strike against South Pars if Iran attacked Qatar again, posting that the U.S. “will massively blow up the entirety of the South Pars Gas Field at an amount of strength and power that Iran has never seen or witnessed before.”

Brent crude climbed more than 3% to more than $110/barrel.

But that price may not even fully reflect the scarcity Trump’s war has created, as the Financial Times reminds us. The Brent benchmark is typically based on the one-month futures contract, meaning it reflects what the market thinks prices will be in a month, not right this minute.

And “Brent crude” typically refers specifically to the active futures contract for a specific grade of light, sweet crude oil produced in the North Sea. It is “light” in that it has a relatively low viscosity making it easier to move into vessels for shipment and refinement. It’s “sweet” in that it contains relatively low levels of polluting sulfur, which makes it cheaper to refine.

No two varieties of crude are identical, but the oil from the Gulf that normally passes through the Strait of Hormuz is medium viscosity, and slightly higher in sulfur, or sour. But being more plentiful and a lot closer than the North Sea, Gulf oil is in high demand by refineries in Asia—China, Japan, and South Korea. And because they’ll pay a premium for it, most of it goes to them.

If they can’t get it, they either need to spend money to re-calibrate their refinery to process a different crude—very expensive—or just pay more to get it from somewhere else, which is what they’re now doing.

This is reflected in prices for different types of crude. The price of oil from Oman, which also exports a medium-sour crude from its ports outside the Strait of Hormuz, has jumped above $150/barrel. Prices for medium-sour crude from Algeria, Kazakhstan, Libya, and Norway have also soared.

Asia is also the largest buyer of the Gulf’s LNG, buying more than 80% of exports from Qatar, which accounts for 20% of global supplies. LNG prices have already soared after Europe began buying more to replace Russian pipeline gas after the invasion of Ukraine in 2022. With Qatari LNG off the market and prices spiking anew, utilities in South and Southeast Asia are turning back to coal.

Trump’s war is likely to intensify Asia’s push into renewable sources of energy to reduce strategic reliance on fossil fuels. South Korean President Lee Jae-myung told his Cabinet as much two weeks ago, while last week economy ministers from the 11-member Association of Southeast Asian Nations agreed to do so in a joint statement.

Trump reiterated his call for U.S. allies to help re-open the Strait of Hormuz to oil shipments. “US allies need to get a grip,” he posted on social media, “step up and help open the Strait of Hormuz.” While European allies have so far rejected him, Trump is expected to put Japanese Prime Minister Sanae Takaichi on the spot when she meets Trump at the White House later today. Takaichi may find herself hiding behind Japan’s the prohibition against her nation engaging in warfare, despite having pledged to lift it.