Oil markets moved higher on March 2 following developments in the Middle East, with geopolitical risk premiums returning to crude benchmarks.
According to the latest Energy Market Situation Report from CSC Commodities, a division of Marex, front-month Brent crude rose $5.55 per barrel to $78.42 in trading, after earlier reaching $82.37. The front-month spread widened by $1.11 per barrel, with increasing backwardation reflecting tighter prompt conditions.
Strait of Hormuz in focus
Shipping activity through the Strait of Hormuz has slowed after several tankers were reportedly struck on March 1. The Strait accounts for around 20 per cent of global oil flows daily, serving as a key route for Middle Eastern exports to Asia.
Some shipping companies have also paused transits through the Bab al-Mandap Strait, which may result in longer sailing routes and firmer freight costs. However, regional producers retain partial bypass options. Saudi Arabia operates the 5 million b/d East-West pipeline to Yanbu on the Red Sea, while the UAE’s 1.8 million b/d pipeline to Fujairah provides an alternative export route outside the Gulf.
Sasha Foss, energy analyst at Marex, notes that even if transit conditions normalise, higher insurance costs and logistical adjustments could temporarily affect flows.
The report indicates that while shipping routes remain a focus for markets, attention is also on the resilience of regional energy infrastructure.
Saudi Arabia’s Abqaiq and Khurais facilities remain central to global supply, while open-source reports referenced by Marex point to an incident at the 550,000 b/d Ras Tanura refinery. Separately, the Juaymah terminal had already suspended LPG exports due to maintenance.
In Iran, Kharg Island continues to serve as the country’s primary export hub
Any prolonged disruption there would have implications for export volumes.
Airspace restrictions across parts of the Middle East, including at Dubai and Bahrain airports, may weigh modestly on regional jet fuel demand, though overall impacts are still being assessed.
Asia reinforces energy buffers
Asian importers are reviewing strategic petroleum reserves as a precautionary measure. India, which imports more than half of its 5 million b/d crude requirement via Hormuz, holds around 10 days of import cover.
Increased Russian crude flows to India are expected, supported by alternative shipping routes. Thailand has suspended oil exports to safeguard domestic supply and holds roughly 60 days of reserves. South Korea and Japan have indicated readiness to draw on strategic stocks if necessary.
China remains relatively well-positioned
Independent refiners process approximately 1.2 million b/d of Iranian crude, and government-controlled reserves have reportedly expanded to around 1.3 billion barrels onshore. Prior stockbuilding has enabled refineries to maintain stable run rates.
Despite the recent price movement, Foss notes that broader supply fundamentals remain comparatively balanced, supported by rising production from Venezuela, Guyana, the US, Canada, Argentina and Brazil. The US is not expected to release crude from its Strategic Petroleum Reserve unless conditions materially tighten.
Meanwhile, OPEC+ core producers agreed on March 1 to increase output by 206,000 b/d in April, reversing earlier pauses on production increases due to weaker prices.
The additional barrels are expected to provide incremental supply to the market, helping to moderate volatility while producers continue to manage market share and price stability.