New Normal Emerges as Middle East Conflict Continues

The prolonged closure of the Strait of Hormuz has led to a 'new normal' in energy markets, forcing buyers to seek alternative sources for oil and natural gas. Diesel supplies have been cut, and China has seized the opportunity to boost exports of electric cars and heavy-duty trucks.

Oil firms have increased exploration and production in areas outside the Mideast Gulf, while Asian firms that had planned to use natural gas to generate electricity have turned to renewables instead. This shift will be permanent, with a lasting impact on global demand for oil and gas.

The strait's reopening and the repair of Russian oil facilities will lead to much lower oil and gas prices. Vulnerable buyers, such as large refining companies, are already limiting forward purchases, anticipating this outcome.