Wall Street advisers spot war ‘tripwires’ as stock releases fight a deepening supply crunch
Oil prices have surged more than 40 percent in three weeks and the International Energy Agency (IEA) is coordinating the largest emergency stock release in its history as war in Iran unleashes what it calls “the most severe oil and gas supply disruptions ever.”
According to the Financial Times, the shutdown of the Strait of Hormuz and US strikes on Kharg Island, Iran’s key oil export hub, have choked Middle East exports and pushed Brent crude above US$100 a barrel.
Traders and analysts told the paper they see little sign of a quick resolution, warning the supply crunch will soon leave the market short of diesel, jet fuel, LPG and naphtha as the crisis spreads into the wider economy.
The conflict now centres on Kharg Island and the Strait of Hormuz, the narrow waterway that normally handles about a fifth of global oil and liquefied natural gas flows.
The Financial Times reported that US President Donald Trump said the US military had “obliterated every military target” on Kharg Island while sparing the energy infrastructure, but warned he would destroy the island’s oil facilities if Iran impeded ships in the strait.
Iran’s new supreme leader, Mojtaba Khamenei, has vowed to keep the strait closed and warned the world to prepare for US$200 oil.
Goldman Sachs estimates, cited by the Financial Times, suggest flows through the Strait of Hormuz have dropped to about 600,000 barrels per day from more than 19m barrels per day in normal times.
JPMorgan analyst Natasha Kaneva wrote, in a note reported by the Financial Times, that crude supply cuts could approach 12m barrels per day by the end of next week, making the deficit “highly visible across physical markets.”
RBC Capital Markets expects prices to exceed the US$128 peak reached weeks after Russia’s 2022 invasion of Ukraine and to top the 2008 record near US$147.
CNBC reported that US crude climbed above US$100 per barrel Sunday evening, with US crude at US$101.32 and Brent at US$106.17 by 6:15 pm ET, as markets priced in the risk that Trump could expand strikes to Kharg’s crude facilities.
Kaneva warned that a direct hit on Kharg’s export terminal would immediately halt most of Iran’s 1.5m barrels per day of crude exports and likely trigger “severe retaliation” by Iran “in the Strait of Hormuz or against regional energy infrastructure.”
To blunt the shock, more than 30 countries have agreed to release 400m barrels from strategic reserves, the largest such action on record.
CNBC reported that the US will supply 172m barrels from its Strategic Petroleum Reserve as part of the effort.
In a detailed breakdown, Reuters said IEA members will provide 271.7m barrels from government stocks, 116.6m barrels from obligated industry stocks and 23.6m barrels from other sources, with 72 percent of the release in crude and 28 percent in products.
Asia and Oceania will begin releasing barrels immediately, while Europe and the Americas will follow by the end of March.
According to Reuters, the closure of shipping lanes has already forced a sharp production cut across the region.
Aramco has shut output from its Safaniya and Zuluf offshore fields, reducing supply from OPEC’s largest producer by 20 percent.
In Iraq, production has dropped 70 percent, while output in the UAE has halved.
Analysts cited by Reuters estimate that total oil output cuts in the Middle East now stand at 7–10m barrels per day, or 7–10 percent of global demand.
Qatar has fully shut liquefied natural gas production, cutting 20 percent of global LNG supply and warning customers they may not receive cargoes until May.
The energy shock is feeding directly into financial markets.
Reuters said Iranian strikes on two oil tankers sent front‑month WTI futures up 9.7 percent and Brent up 9.2 percent, touching US$100, and triggered a broad US equity sell‑off in which all three major indexes fell more than 1.5 percent.
Investors fear that the largest‑ever oil supply disruption, as described by the IEA and reported by Reuters, will stoke inflation and reduce the odds of interest‑rate cuts later this year.
Wall Street is leaning heavily on geopolitical expertise to navigate the turmoil.
Geopolitical risk consultancy WestExec Advisors told clients, including big banks, around 6 pm ET the day before US‑Israeli air strikes killed Iran’s Supreme Leader on 28 February that there was a 65 percent probability of military action that weekend.
Managing partner Nitin Chadda said “it was clear to us that there was an intention to take some meaningful Iran military action,” and noted a surge in queries from financial clients and scenario‑planning work with banks.
Other ex‑military and national security advisors told Reuters they had urged investors to track “tripwires” — including the USS Gerald R. Ford’s arrival in Israel, an apparent “last ditch” visit by Oman’s foreign minister to Washington, and partial embassy evacuations.
They said those developments signalled a sharply higher chance of strikes within 24–72 hours.
At the same time, major banks have been building their own geopolitical advisory capacity.
Reuters reported that JPMorgan, Bank of America, Lazard, Goldman Sachs and Deutsche Bank have launched internal geopolitical units or hired senior military figures in recent years as demand for this kind of analysis has grown through the Trump administration’s US‑China tensions, the COVID‑19 shock, the war in Ukraine and now the Iran conflict.
