Global Oil Conflicts Cause Disruptions in Supply Chains

The ongoing oil conflicts around the world are causing disruptions to global supply chains. The Strait of Hormuz, through which about a fifth of the world's oil passes, has been closed since March due to a war between Iran and the US-Israel alliance. Despite threats from former US President Donald Trump, Iran declared the narrow Strait along its coast closed to ship traffic.

Some ships have managed to pass through at various times over the past six months, but total traffic has slowed to a trickle. The primary reason prices didn't skyrocket as expected was due to China cutting its oil use by embracing electrified transportation. Other countries also saw EV sales surge, but China's EVs offset more oil use than any other country.

Another key pipeline in Saudi Arabia, built in the 1980s to relieve pressure during a previous Hormuz conflict, has been shut down due to a drone attack by the Houthi rebels. This narrow oil chokepoint is also vulnerable to attacks and threats from the Houthis, which could further disrupt global supply chains.

The Ukraine-Russia conflict has also led to disruptions in oil markets. After Russia invaded Ukraine in 2014, it occupied Crimea, securing another method for oil to leave Russia and enter the world economy. However, as tensions escalated, other countries imposed sanctions on Russia, limiting its ability to export oil.