Why oil and gas markets are dreading the risk of supply disruption in the Strait of Hormuz
Basij paramilitary force speed boats are sailing along the Persian Gulf near the Bushehr nuclear power plant during the IRGC marine parade commemorating the Persian Gulf National Day in the south of Iran, on April 29, 2024.
Nurphoto | Nurphoto | Getty Images
An escalating conflict in the Middle East has thrust the world’s most important oil artery back into the global spotlight.
The Strait of Hormuz is widely recognized as a vital oil transit chokepoint. Situated between Iran and Oman, the waterway is a narrow but strategically important channel that links crude producers in the Middle East with key markets across the world.
In 2022, oil flow in the Strait of Hormuz averaged 21 million barrels per day, according to the U.S. Energy Information Administration (EIA). That’s the equivalent of about 21% of the global crude trade.
The inability of oil to traverse through a major chokepoint, even temporarily, can ratchet up global energy prices, raise shipping costs and create significant supply delays.
For many energy analysts, an event where there is a blockade or a significant disruption to flows via the Strait of Hormuz, is seen as a worst-case scenario — one that could prompt oil prices to climb far above $100 a barrel.
“The worst case could well be if Israel strikes Iran [and] Iran takes actions to slow down or potentially try to block the Strait of Hormuz,” Alan Gelder, energy analyst at Wood Mackenzie, told CNBC’s “Squawk Box Europe” on Monday.
“[This] would have a far more dramatic effect because that is where 20% of global crude exports travel through from the likes of Saudi Arabia, Kuwait and Iraq — and the UAE to some extent — that are the holders of the global spare capacity,” Gelder said.
“So, we contend the market is not pricing in the worst case, it is pricing in the potential impact on Iranian energy infrastructure,” he added.
Israel’s promise to hit back at Iran following a ballistic missile attack last week has stoked speculation that the country could soon launch an attack on Tehran’s energy infrastructure.
Iran, which has pledged a forceful response of its own in the event of any further Israeli actions, is a major player in the global oil market.
How high could oil prices go?
Energy analysts have questioned whether oil markets are being too complacent about the risks of a widening conflict in the Middle East.
Saul Kavonic, senior research analyst at MST Financial, said supply disruptions along the Strait of Hormuz could send oil prices significantly higher.
“If we see an attack on Iranian production, up to about 3% of global supply could be curtailed and even if we just see tighter sanctions, that could also start to curtail supply by up to 3%. That on its own could see oil approach 100 or even exceed 100 dollars per barrel,” Kavonic told CNBC’s “Squawk Box Asia” on Oct. 3.
“If [transit through the Strait of Hormuz] was to be impacted, we’re talking about an oil price impact that would be three times larger than the oil price shocks of the 1970s in the wake of the Iranian revolution and the Arab oil embargo, and now we’re talking about $150 plus a barrel of oil,” he added.
Oil prices traded more than 3% on Monday, extending gains even after notching their sharpest weekly gain since early 2023 last week.
International benchmark Brent crude futures with December expiry were last seen trading 1.5% lower at $79.74 a barrel, while U.S. West Texas Intermediate futures stood at $75.99, down 1.5%.
Bjarne Schieldrop, chief commodities analyst at Swedish bank SEB, said the general rule of thumb in commodity markets is that if supply is severely restricted, then the price will often spike to between five and 10 times its normal level.
“So, if worst came to worst and the Strait of Hormuz was closed for a month or more, then Brent crude would likely spike to USD 350/b, the world economy would crater and the oil price would fall back to below USD 200/b again over some time,” Schieldrop said Friday in a research note.
“But seeing where the oil price sits right now the market doesn’t seem to hold much probability for such a development at all,” he added.
What about gas markets?
Warren Patterson, head of commodities strategy at Dutch bank ING, said any disruptions to transit along the Strait of Hormuz would have seismic consequences for global energy markets.
“The key concern, while still extreme, would be that these disruptions spill over to the Strait of Hormuz, affecting Persian Gulf oil flows,” Patterson said in a research note published on Oct. 4.
“A significant disruption to these flows would be enough to push oil prices to new record highs, surpassing the record high of close to $150/bbl in 2008,” he added.
View looking north showing the Strait of Hormuz, connecting the Gulf of Oman with the Persian Gulf, with the Zagros Mountains and Qeshm Island of Iran in the background, and areas of Oman, Muscat and the United Arab Emirates in the foreground, as seen from the Space Shuttle Columbia during shuttle mission STS-52, 22nd October to 1st November 1992.
Space Frontiers | Archive Photos | Getty Images
ING’s Patterson said any supply disruption in relation to the Strait of Hormuz would not be isolated to the oil market.
“It could also potentially lead to disruptions in [liquified natural gas] flows from Qatar, which makes up more than 20% of global LNG trade,” he continued.
“This would be a shock to global gas markets, particularly as we move into the northern hemisphere winter, where we see stronger gas demand for heating purposes. While we are seeing a ramp-up in new LNG export capacity, this still falls well short of Qatari export volumes.”
After several months of waiting, Lucid Air drivers now have access to Android Auto. Lucid (LCID) launched the popular feature through a software update this week.
Lucid Air owners gain access to Android Auto
Lucid promised it was coming, and now it’s finally here. “Android Auto is one of the most requested features,” according to Lucid’s head of software engineering, Dr Jean-Philippe Gauthier.
All Lucid Air vehicles now have access to Android Auto Smart Driving Companion through an OTA software update (Lucid OS 2.7.0).
You can now view Android apps, messages, and other media on Lucid’s massive 34″ Air Glass Cockpit. For those with Android 11 or higher, you can connect to Android Auto wirelessly. Those with Android 9.0 or higher will require a USB cable.
Lucid said it would launch the popular feature late last year, but it’s just beginning to roll out to Air owners this week. The company website says the Gravity SUV “will support both wireless Apple CarPlay and Android Auto,” but no further specifics are mentioned.
The 2025 Lucid Air is the “world’s most efficient car” with over 420 miles of EPA-estimated driving range. It also boasts the highest MPGe of any EV at 146 MPGe.
After resuming Gravity deliveries in April, Lucid is quickly ramping up production of its first electric SUV. Lucid expects to produce 20,000 vehicles this year, more than double the 9,000 it made last year.
The Lucid Gravity GT is now available for sale at $94,900, boasting an impressive range of up to 450 miles. Later this year, Lucid will launch the lower-priced Touring trim, starting at $79,900.
After launching its largest discounts to date earlier this month, Lucid is currently offering over $30,000 off select 2025 Air models.
Looking to test one out for yourself? You can use our links below to find current deals on the Lucid Air and Gravity near you.
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Another entry-level electric car is on the way. The Honda Super EV Concept may look a bit funky, but it could be the automaker’s next big hit at an affordable price.
Is Honda launching an affordable EV?
We will get our first full look at the funky new Super EV Concept at the 2025 Goodwood Festival of Speed in West Sussex, England, next month.
The concept will make its global debut during the event, previewing a “new, small-size” electric vehicle. Despite its compact size, the company promises that it will be fun to drive, with an experience that is “unique to Honda.”
Designed as an A-segment electric SUV, Honda says the affordable EV offers an “uplifting, heart-pounding driving experience.”
The company is already testing prototypes in the UK. Although Honda confirmed plans to launch a production model in the future, it didn’t specify a date or offer any other technical details.
Honda will also use the event to hold the European premiere of the electric 0 Series SUV. Earlier this year, we got a look at the upcoming electric SUV (also a bit funky looking) after a prototype was showcased at a Formula One event in Tokyo.
You can see Honda is using the same purple camouflage used for the 0 Series electric SUV to disguise it. The Super EV Concept looks like a futuristic successor to the Honda e. However, with a new EV platform, batteries, and motor, Honda’s new models look to be a significant upgrade.
The new EV SUV will be one of seven new electric vehicles Honda plans to launch by 2030. A production version of the Super EV concept is expected to join it.
The new Super EV Concept will make its official debut, climbing the 1.16-mile (1.856 km) hill course at Goodwood FOS, which runs from July 10 to July 13.
Will Honda launch its new entry-level EV in the US? According to a Nikkei report earlier this year, Honda plans to launch an affordable EV, priced under $30,000 in the US, following the 0 Series electric SUV and sedan.
We’ll have to wait until closer to launch for confirmation. Check back soon for more info. We’ll keep you updated with the latest.
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Tesla (TSLA) has reportedly told employees that it will pause production at Gigafactory Texas, where it produces Model Y and Cybertruck vehicles, for the second time in as many months.
In late May, Tesla extended a long weekend into a week-long production shutdown at Gigafactory Texas.
The move came amid lower demand and inventory buildups.
We reported earlier today that Tesla has to rent out empty parking lots around the US to use as overflow lots for its extra inventory.
Now, Tesla told employees that it is again shutting down Model Y and Cybertruck production at Gigafactory Texas over the first week of July.
With the Fourth of July being a Friday this year, it was going to be a long weekend, but Tesla again decided to extend the production shutdown from June 30th through the following week, according to employees talking to Business Insider.
Tesla claimed that it will enable the company to perform “maintenance and improvements on production lines.” Employees are being offered paid time off or to come in for training.
As we have previously reported, Tesla has been throttling down production of the Cybertruck in 2025 as sales are currently tracking about half of last year.
That’s despite having launched cheaper versions of the electric truck, gaining access to the federal tax credit for the Cybertruck, and offering bigger discounts and incentives.
Tesla reported a 13% decrease in deliveries in Q1 2025 compared to the same period last year, which the automaker attributed to its Model Y design changeover reducing production.
However, Tesla’s deliveries are currently tracking to be down even more in the second quarter compared to last year, despite Tesla having ramped up production.
Electrek’s Take
What’s going to be the excuse this quarter? As I reported earlier today, Tesla is currently tracking to deliver 355,000-360,000 units in Q2, which would be down 19-20% compared to 2024.
It would be an even steeper decline even with the new Model Y.
It clearly wasn’t the problem.
The automaker had already reduced its production capacity at most factories in 2024, when it ran at about 60% capacity due to lower demand.
Now, Tesla is stopping production of its best-selling Model Y with the new design twice in two months?
This is not looking good.
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