The Contemporary Gordian Knot: The Strait of Hormuz

El Taladro Azul

M. Juan Szabo [1] y Luis A. Pacheco [2]

Published  Originally in Spanish in  LA GRAN ALDEA 

Although the global economy is relatively less dependent on oil than in 1973, when prices quadrupled due to the Arab embargo, or in 1979-80 during the Iranian revolution, it is no less true that the impact of the current war in the Middle East could be devastating and, as in the past, could certainly transform the energy market in the long term.

The military escalation between Iran, Israel, and the United States, which has caused the closure of navigation through the Strait of Hormuz, has forced the interruption of oil and gas production in the region. An estimated 15% of the global oil supply has been shut down, pushing barrel prices to flirt with $100, while 20% of the global liquefied natural gas supply has been affected. Iran's response to the attack has extended the conflict to other countries in the region, with daily attacks against key oil infrastructure, such as the Ras Tanura refinery in Saudi Arabia and the Bapco refinery in Bahrain.

"Iran will continue fighting and will keep the Strait of Hormuz closed as a tool against the United States and Israel," said the new Supreme Leader, Mojtaba Khamenei, on Thursday, in the first comments attributed to him since he succeeded his father, who was assassinated in the first waves of the conflict. Clearly, the regional situation has become more complex than President Trump and his advisors imagined, and they admit that the Strait of Hormuz is a "tactically complex environment."

Petropolitical Fundamentals

One of the most difficult consequences to manage is the near-total shutdown of liquefied natural gas production in Qatar, due to the scarcity of alternative supply flexibility. Meanwhile, the U.S. bombed military installations at Iran's main oil export center on Kharg Island, threatening Iranian exports and aggravating the global supply shortage.

China and Europe have been most affected by the crisis. China imports nearly 40% of its oil demand and 30% of its liquefied natural gas (LNG) demand through this strait. In comparison, Europe depends on Hormuz for 12-14% of its gas supply, at least while maintaining sanctions against Russia for the invasion of Ukraine. The aviation, chemical, and fertilizer sectors have also been affected by scarce and more expensive supplies, generating strong global inflationary pressures.

To try to mitigate the situation, Saudi Arabia is maximizing its crude shipments from the Yanbu terminal on the Red Sea, and the United Arab Emirates (UAE) is taking advantage of its outlet through the Gulf of Oman via the port of Fujairah. On the other hand, the U.S. temporarily relaxed sanctions against Russia and, on the recommendation of the International Energy Agency (IEA), countries around the world are beginning to release strategic oil reserves, resuming the role for which the agency was created.

The global consequences of the war in the Middle East depend on the duration of the Strait of Hormuz closure. Achieving a return to normalcy around the Strait will not be easy while hostilities continue. There is a marked military imbalance between Iran and Oman, the two countries that share control of the strait; recall that Oman is one of the few countries in the region without American bases. And although Iran has suffered significant losses in its arsenal, the weaponry it still possesses—suicide vessels, mine-laying boats, drones, and small submarines—gives it a logistical advantage to control navigation in the strait. In fact, that appears to be its main objective in what is defined as "asymmetric warfare": inflicting the greatest possible damage to the world economy to pressure the United States and its ally Israel.

China's Ministry of Foreign Affairs, which has said little, urged the parties today to cease military operations, warning that further escalation would damage the global economy.

Iran's New Leadership

Iran's new Supreme Leader, Mojtaba Khamenei, who assumed office after his father, Ali Khamenei, was confirmed dead, has not been seen in public. It has been rumored that he may be injured, perhaps in a coma, or simply sheltering in a secret location for security reasons, given persistent threats of external attacks.

Unable to appear in person, he had his first official statement read by a presenter on Iranian state television. Key points of his message include:

• "Total revenge" against the U.S. and Israel to "avenge the blood of the martyrs," including his father's
• Declared that the Strait of Hormuz should be used as "leverage" and remain permanently closed as retaliation
• Assured that Iran will maintain its attacks against its adversaries' assets and interests in the region
• Urged Iran's neighbors to close U.S. bases on their territory and warned that Iran will continue attacking them

Actions speak louder than words: two oil tankers caught fire near the Iraqi port of Basra after being hit by presumed Iranian vessels loaded with explosives, a clear signal of what Tehran is willing to do.

Fears that Iran could mine the Strait of Hormuz intensified after Britain claimed that evidence of mine placement was increasing, although Tehran denied it. According to sources familiar with U.S. intelligence reports, Iran has deployed a few dozen mines in recent days in this waterway. However, at least four tankers have been reported to have crossed the strait with their transponders turned off, bound for China and India.

The Russian Variable

The United States is temporarily easing some sanctions on Russian oil exports, reflecting global concern over the sharp rise in crude prices driven by supply shortages stemming from the war with Iran.

This measure, intended to calm market anxiety about disruptions to oil and gas supply in the Middle East, underscores how the war bolsters Moscow's ability to profit from its energy exports, a pillar of the Kremlin's budget as it advances its invasion of Ukraine. Treasury Secretary Scott Bessent stated that the "short-term, limited-scope measure" was part of "President Donald Trump's decisive actions to promote stability in global energy markets" and to "keep prices low."

Putin's policy of remaining silent about the attack on one of his main allies has benefited him, not only from the marked increase in hydrocarbon prices but also from being able to place, in the short term, all the crude in floating inventory by virtue of the temporary lifting of U.S. sanctions.

According to Bessent, allowing the sale of stockpiled Russian oil would not provide any additional financial benefit to the Russian government, since the Kremlin taxed that oil when it was extracted. What Bessent does not take into account, or does not say, is that this decision allows them to refill the fleet with new production; moreover, at the end of the conflict, Russia's strategic position will likely be strengthened.

Impact on Global Supply

Maximum geopolitical risks, especially the closure of the Strait of Hormuz, have generated high volatility in the market and price levels not seen since the Russian invasion of Ukraine, which could continue depending on the war's development. It is estimated that some 180 million barrels of crude have stopped being supplied to the world due to the current restriction, opposite to what occurred in 2020 as a result of the pandemic, when falling demand led to production shutdowns. Saudi Arabia has reduced its production to 2.0 million barrels per day (MMbpd) after closing the giant Safaniya and Zuluf heavy and medium crude fields.

Iraq, whose exposure is greater than most countries, has few alternative export routes. Before the war, the country produced 4.4 MMbpd and exported 3.4 MMbpd from its southern terminals. When the Strait of Hormuz was blocked, exports collapsed, and today Iraq produces less than 1.5 MMbpd, according to government sources.

The market's reaction is perfectly understandable and, in turn, calls into question the projections of global overproduction repeatedly forecast by some analysts, particularly the IEA. Their projections indicated a production surplus from late 2025 of 2 to 4 MMbpd that would grow during 2026, equivalent to an inventoried crude volume of around 250 million barrels, which could well have mitigated the current problem; we must necessarily conclude that such a surplus, or at least in the quantities mentioned, never existed.

Ironically, the Agency (IEA) now recommends releasing 400 million barrels from strategic reserves worldwide.

The expectation that the Trump Administration's military intervention in Iran would lead, with due differences, to an eventual repetition of the process experienced in Venezuela—regime decapitation and establishment of a supervised interim government—shows that such projections lacked reasonable foundation and that, on the contrary, the situation is leading to scenarios that apparently were not properly considered by the White House.

Price Dynamics

As the Persian Gulf supply continues to be strangled and palliatives are implemented and take effect, including the use of commercial inventories, the market will continue adjusting prices, which currently remain above $100/bbl for Brent crude.

Some analysts from firms like Wood Mackenzie warn that if the closure extends beyond four weeks, crude could escalate to the $120-150/bbl range. The British magazine The Economist estimates that the price should reach $150 before demand begins to be destroyed. However, given the seriousness of the situation, it is possible that the strait could be opened through multilateral military protection mechanisms for tankers, even with an initially limited schedule; the Trump administration says it is working on an alliance to this end.

A return to normalcy in transit through the Strait of Hormuz will translate into a substantial drop in prices. Nevertheless, the aftereffects of the disruption in direct supplies and the breakdown of supply chains will take months to recover.

Consequently, the Brent and WTI benchmark crudes, at Friday's market close on March 13, 2026, traded at $103.14/bbl and $98.71/bbl, respectively, reflecting an increase of approximately 4.5% from the previous week's close.

Venezuela

An Experiment in Neo-Imperialism

Focusing on the Venezuelan situation, we find that the country is at a critical stage, marked by the reorganization of its power structure and the intensification of U.S. pressure across political, economic, and social spheres. This has modified the country's position in the international geopolitical context by introducing a relative improvement in investors' perception of country risk. There is a belief that the misnamed "tutelage" by the White House somehow counterbalances the still-existing risks of operating in a country without robust institutions.

Despite a partial leadership change, Chavismo seeks to maintain its control over the country by strengthening the intelligence apparatus and ensuring military loyalty. At the same time, the opposition, led by figures such as María Corina Machado, Juan Pablo Guanipa, Freddy Superlano, and others, continues to pressure the regime through public demonstrations.

Washington appears to be pursuing a hemispheric control strategy that uses the energy sector as an instrument of power. Recently, the Trump administration has authorized American and some international companies to resume commercial activities with the Venezuelan oil industry to stabilize supply. Pressures to expedite the process have enabled actions that may lead to production increases. Still, the processes for awarding exploration and production contracts appear to suffer from the opacity and lack of transparency that have characterized the regime over the past 25 years.

Venezuela's abundant natural resources have increased the strategic value of the relationship with the United States, especially given the turbulence in the Middle East, which contains the world's main hydrocarbon reserves and whose geopolitical importance cannot be overstated.

Consequently, not only were consular diplomatic relations reactivated—we see the American flag flying again at the embassy in Caracas—but formal recognition of Delcy Rodríguez as president was also announced. Ironically, from a constitutional perspective, Delcy Rodríguez is not considered a legitimate president, since Maduro's absence has not been officially declared to avoid triggering the period that requires calling elections.

The State Department notified a New York court, where one of the cases against Venezuela is being heard, through a prosecutor, that the U.S. recognizes Delcy Rodríguez as Venezuela's sole head of state. A document dated March 10, 2026, and signed by Michael G. Kozak, a senior official of the State Department's Bureau of Western Hemisphere Affairs, establishes the new official Washington position regarding Venezuela before the Southern District Court of New York. The text adds that diplomatic and consular normalization seeks to promote stability, economic recovery, and political reconciliation, while warning that Washington will continue to examine transactions with the Venezuelan interim authorities closely and will maintain the economic pressure tools available.

The processes contemplated in the stabilization and recovery stages are advancing, with crude sales at market prices, fund deliveries from accounts controlled by the U.S. Treasury, and the BCV are actively settling their accounts with banks and conducting foreign exchange market auctions. However, the economy remains fragile, with accumulated inflation of 52% in the first two months of 2026.

In any case, the apparent improvements derived from American tutelage do not reach the lowest strata of the population: approximately 18% suffer from malnutrition, one-third experience severe food insecurity, and poverty remains at high levels, according to Cáritas Venezuela and UN-linked agencies.

The $500 million received in March from Treasury accounts was auctioned in the first half of the month. The BCV is confident it will receive additional funds due to the high availability of accounts where hydrocarbon sales revenues accumulate. The $500 million received in January and February were insufficient to reduce the exchange gap, which remains around 40%. The official rate, at the week's close, reached 447 Bs./$.

During the week, the new Mining Law was approved in first reading, and the consultation period began before it was presented for approval in second reading. Another law pushed from Washington, in this new version of 21st-century Gomecismo.

An incremental natural gas supply agreement was signed with the Repsol-ENI consortium from the La Perla Field in the western part of the country. It has been mentioned that the increase could be directed toward exports, supply to Colombia, and, in the future, the development of floating gas liquefaction facilities for export purposes. Likewise, it was revealed that the Ayacucho 8 block in the Orinoco Belt would have been assigned to Chevron. The block is adjacent to the southern boundary of the PetroPiar block and has approximately 2 billion barrels of recoverable resources. The terms of that assignment have not been made public.

Information surfaced again that PDVSA is advancing in the termination of at least 17 CPPs (productive participation contracts) awarded in recent years to national and international companies for oil field operations. These contracts were promoted as a mechanism to increase production through delegated management schemes that involved companies registered in China, Hong Kong, Spain, Barbados, Colombia, and Venezuela. Many of them lack the technical and financial capacity to carry out operations.

If these contracts are canceled, production would return to PDVSA's control. It could result in reduced output unless a reallocation mechanism is implemented that meets the requirements of the new Organic Hydrocarbons Law (LOH) and the transparency levels required under U.S. tutelage.

An event outside Venezuela, but difficult to separate from it, is that the Cuban government has confirmed the start of direct negotiations with the Trump administration. These conversations occur at a critical moment of energy and economic collapse on the island. President Miguel Díaz-Canel publicly announced that his government maintains dialogues with Washington to "identify and resolve bilateral problems." Raúl Guillermo Rodríguez Castro, grandson of Raúl Castro, is mentioned as the contact person with Secretary of State Marco Rubio.

Oil Operations

Production and refining remained stable during the past week.

Weekly Production

Weekly production was 887 thousand barrels per day (Mbpd), geographically distributed as follows:

• West: 245 Mbpd (Chevron: 102 Mbpd)
• East: 111 Mbpd
• Orinoco Belt: 531 Mbpd (Chevron: 140 Mbpd)
• TOTAL: 887 Mbpd — Chevron: 242 Mbpd

In OPEC's monthly report published on March 11, secondary sources place Venezuelan production for February at 903 Mbpd, while direct information received by OPEC indicated production of 1,021 Mbpd.

Refining

National refineries processed 250 Mbpd of crude and intermediate products, yielding 78 Mbpd of gasoline and 74 Mbpd of diesel. However, longer lines have been observed at service stations due to a combination of shortages and the intention to bring the price to $1 per liter.

Exports and Revenue

First-half exports coincide with the programming of different terminals. However, due to increased international prices, revenues from hydrocarbon sales could exceed $1,500 million in March.

[1]: International Analyst
[2]: Nonresident Fellow, Baker Institute

 

The Strait Narrows

 El Taladro Azul

M. Juan Szabo [1] y Luis A. Pacheco [2]

Published  Originally in Spanish in  LA GRAN ALDEA 

Just three days after the start of the US-Israeli attack on Iran, the Tehran regime resorted to its most powerful geopolitical weapon: “The Strait (of Hormuz) is closed. If anyone tries to pass, the heroes of the Revolutionary Guard and the regular navy will set those ships on fire,” said Ebrahim Jabari, senior advisor to the commander-in-chief of the Guard, in comments released this past Monday.  

The Strait of Hormuz, for decades one of the most sensitive points in the global hydrocarbon trade, has finally materialized its ever-present threat and become the Achilles' heel of the energy world. During the week, only a fraction of the usual traffic passed through the strait, reducing global oil and liquefied natural gas (LNG) supplies, especially to Asia. The tight supply has driven prices to levels not seen since Russia's invasion of Ukraine in 2022. The $ 100-per-barrel mark was surpassed over the weekend, triggering alarm bells across all markets.

The Trump administration appears to have been caught off guard by these events and has had to temporarily suspend sanctions on Russian crude, allowing India to purchase Russian oil and conveniently store it in the waters of the Gulf of Oman. Similarly, Europe purchased Russian natural gas to combat rising prices.

After more than a week of intensive US and Israeli bombing targeting Iran's military capabilities, there are signs that Iran's missile and drone arsenal may be shrinking. Some sources estimate that Iran's launch capacity has decreased by 75%. In recent days, the number of attacks using these weapons has fallen by approximately 90% compared to the early days of the conflict, which could explain Hezbollah's increased military capacity by launching missiles against Israeli targets from Lebanon.

However, attacks on Arab countries have intensified, although this strategy, far from threatening those countries, has promoted cooperation between the United States, Israel, Saudi Arabia, Kuwait, the United Arab Emirates, Bahrain, and Qatar. Some of these states have begun planning retaliatory measures; for example, the United Arab Emirates announced the possible freezing of Iranian funds in its financial system. Faced with this situation, Iranian President Masoud Pezeshkian apologized to the affected neighboring countries and assured them that no new offensives would be launched against them, a message that failed to gain internal support within the regime, and the attacks continue.

To date, the effects of the conflict have elicited divergent interpretations. On the one hand, some analysts point out that the process of controlling Iran has proven more complex than anticipated by the US leadership, indicating an underestimation of Iranian military capabilities and a lack of strategic clarity regarding the stated objectives; in particular, the impact on energy prices does not appear to have been on Washington's radar. This perspective holds that the US faces an unpredictable and difficult situation to manage in negotiations, despite President Trump's demand for "unconditional surrender."

On the other hand, another group of analysts argues that the US process is part of a global strategy that, despite temporary challenges, aims to reshape the geopolitics of the Middle East, particularly by strengthening the Abraham Accords by including more Arab countries. Under this approach, a weakened and isolated Iran would be unable to finance extremist movements in the Middle East or other regions, leading to greater peace in the region.

On Monday, Ali Khamenei's son, Mojtaba, was named as the next supreme leader. US President Donald Trump had previously stated that Mojtaba would be an "unacceptable" choice, and Israel vowed to eliminate any successor. However, the path toward a cessation of hostilities remains unclear.

 

“Petropolitical” Foundations

We find ourselves at one of those moments when the fundamentals and geopolitics of hydrocarbons are difficult to separate, like Siamese twins. The inseparable point of connection, at least temporarily, is the Strait of Hormuz. In this 33-km-wide waterway, to reduce the risk of collision, ships follow a traffic separation scheme. Incoming ships use one lane and outgoing ships use another. Both have sufficient draft to allow the passage of loaded VLCCs (Very Large Crude Carriers); each lane is two miles wide, and they are separated by a two-mile-wide median. Approximately 20% of the oil (35% of globally traded crude) and 30% of the LNG exported daily from the region pass through the strait.

To avoid the Strait of Hormuz, the alternatives are limited and partial, consisting of a few pipelines built specifically to mitigate the risk of blockage. These pipelines are:

·      The East-West Petroline pipeline connects the Abqaiq oil hub, near the Persian Gulf, with the port of Yanbu on the Red Sea in Saudi Arabia. It has a capacity of 5 million barrels per day (MMbpd), limited to 4.4 MMBPD by the port of Yanbu's dispatch capacity.

·      The Habshan-Fujairah pipeline in the UAE links the Habshan oil fields (Abu Dhabi) to the Fujairah export terminal, located on the Gulf of Oman, outside the Strait of Hormuz. The pipeline's maximum capacity is 1.8 million barrels per day (MMbpd), but its normal utilization rate is only 80%, so it does not provide significant volumes in an emergency.

·      The Goreh-Jask pipeline in Iran connects the Goreh terminal to the port of Jask, located east of the strait. Designed to move 1.5 million barrels per day (MMbpd), it currently has a limited capacity of 300 MMbpd.

·      The SUMED (Suez-Mediterranean) pipeline in Egypt does not alleviate the flow of crude oil from the Persian Gulf; it complements the volume that can be transported through the Suez Canal from the Red Sea to the Mediterranean, supporting the flow that leaves via the Saudi Arabian route.

Iraq, Kuwait, Qatar, and Bahrain lack operational alternative infrastructure to bypass the Strait and rely entirely on canal navigation. However, analysts warn that these routes could only absorb a fraction of the total flow, leaving approximately two-thirds of Gulf exports blocked in the event of a complete closure. Iran, Kuwait, and Qatar have already begun limiting their production.

On the other hand, OPEC+ has no options to increase its production, given that the countries that, in theory, could do so are caught up in the Hormuz problem.

The rest of the world has very limited possibilities to mitigate the temporary deficit.

·      Canada is trying to increase production and ship it through its new pipeline to the Pacific, allocating shipments to the Far East.

·      The US temporarily licensed the sale of Russian crude oil in floating inventory to India, and several VLCCs have already left the Gulf of Oman bound for India.

·      In the US, the use of drilling rigs has increased by 4 units, and fracking crews by 7, but it is a limited effort, and its results will be felt only after the emergency passes, if it lasts long.

·      The US government is taking steps to restore transit through the strait by offering political risk insurance for oil tankers transiting the Gulf. Still, the measure has not had the expected response.

 

·      The G7 countries are considering using their strategic reserves to mitigate rising prices, and most have expressed their support for this idea. However, without a clear understanding of how long the conflict will last, this may only be a short-term, palliative measure.

 

The Strait of Hormuz has been largely closed in recent days, cutting off access to a fifth of the world's oil and LNG supply. However, it has emerged that China, which obtains much of its crude oil and gas from Iran, is in talks with Iran to ensure the safe passage of crude oil and liquefied natural gas tankers through the strait. In fact, some of the tankers that were able to pass through the strait were confirmed to be bound for China. This development seemed to indicate that targeted supply disruptions will also be a piece in the new geopolitical chessboard.

It is not unreasonable to say that one of the biggest beneficiaries of the events in the Middle East is Vladimir Putin's Russia, which will reap higher energy prices in an environment where sanctions will be circumvented to avoid a collapse of the global supply of both oil and gas.

Events of Interest

·      Qatar declared force majeure on gas exports amid the war, and sources said it could take at least a month to return to normal production levels. Qatar supplies 20% of the world's liquefied natural gas.

·      Europe seems to have learned nothing from its history. Solar and wind power account for less than 15% of total energy consumption. Fossil fuels supply the remaining 85%. Yet Europe has acted as if the end of fossil fuels were imminent. Hydrocarbon fields in the British sector of the North Sea are being shut down prematurely; the Netherlands has closed gas fields that were still productive; and the EU has virtually abandoned shale gas development, despite the existence of regional shale deposits that could be fracked and commercially produced, opting instead to rely on imports.

·      The United Arab Emirates, which has developed a diversification strategy by positioning itself as a global financial hub and a haven for large and new companies, is beginning to suffer damage to its image as a result of Iranian attacks.

·      Side effects of the Russia-Ukraine war:

1) Hungarian oil company MOL and its Slovak subsidiary Slovnaft have filed a complaint with the EU competition watchdog against Croatian pipeline operator JANAF for refusing to allow the transit of Russian oil imports transported by sea. The Hungarian group has faced a disruption in the supply of Russian crude through the Druzhba pipeline, which runs through Ukraine, and has had to rely on the Adriatic pipeline from Croatia.

2) A Russian-flagged liquefied natural gas tanker, subject to US and UK sanctions, caught fire in the Mediterranean early Tuesday morning following a suspected explosion. The vessel, identified as the Arctic Metagaz, was destroyed around 4:00 a.m. local time between Malta and Libya. Several sources cited by the Times of Malta reported a series of explosions before the crew was rescued. The security firm EOS Risk Group indicated that the vessel may have been attacked by drones while sailing east. The tanker had deactivated its AIS tracker 300 km before the incident, allegedly following a so-called “gray route” to evade sanctions.

Crude Oil Prices

The oil situation in the Middle East in early March 2026 is critical, marked by a severe storage crisis and the blocking of export routes following the conflict with Iran.

When a US president declares there will be no deal with Iran short of "unconditional surrender," oil markets surge. Therefore, it should come as no surprise that this week the price of Brent crude surpassed $92/BBL for the first time since Russia's invasion of Ukraine in 2022.

Fears of overproduction and low prices have been temporarily forgotten, and concern has shifted towards the effects that high prices caused by shortages and the potential geopolitical risks collateral to this regional war may generate, as well as towards another wave of generalized inflation that materially affects the world economy.

Thus, at the time of writing, Monday, March 9, 2026, Brent and WTI crude oil benchmarks were trading at $101.6/bbl and $99.50/bbl, respectively, reflecting an increase of approximately 18% compared to the previous week's close, having been at much higher levels over the weekend. This variable, perhaps more than the military effectiveness of the participants, will determine the course of the conflict. It was reported this Monday, March 9, that the Strait of Hormuz was beginning to clear.

Natural gas prices reflected the Persian Gulf crisis more significantly. Europe saw increases of 50-70%, while Asia experienced increases of 20-45%.

VENEZUELA

“(…) everything changes” so that “(…) everything stays the same.” The Leopard

The Trump Administration's priority in Venezuela is to revive the Venezuelan economy and markets. The visits of high-level representatives from the CIA, Southern Command, the Department of Energy, and, more recently, the Department of the Interior—the latter leading groups of investors and companies interested in Venezuela—and received with great fanfare by the regime headed by Delcy Rodríguez, are evidence of this superficial adjustment.

To this, we can add the licenses granted by OFAC in response to a rapidly approved Organic Hydrocarbons Law, as well as the restructuring of oil exports at prices significantly higher than in previous years and supposedly protected against creditors and the Chavista regime's habitual wastefulness. The resumption of direct flights between the two countries is also a sign in that direction.

The week was filled with visits, meetings, the signing of agreements, and the granting of new licenses. U.S. Secretary of the Interior Doug Burgum paid an official visit to Venezuela from March 4 to 6, 2026. This visit marked a turning point in bilateral relations, with a focus on energy and mining cooperation under the Trump administration. Burgum was received by interim president Delcy Rodríguez to assess and promote a "legitimate" mining sector and explore legal avenues for U.S. companies to resume operations in the country. Also present at the meetings were oil executives, the Venezuelan Interior Minister, Diosdado Cabello, and the newly minted Vice President for Economic Affairs, Calixto Ortega Sánchez.

 

Several investment projects in the mining and energy sectors were discussed, including negotiations for a multi-million-dollar gold deal between Minerven (which received an OFAC license) and Trafigura, as well as potential agreements on other minerals. Additionally, senior executives from the British oil company Shell plc visited Miraflores and met with officials from the Ministry of Petroleum and PDVSA. The topics discussed and agreements signed relate to the development of the Dragon field in northern Paria and the sale and delivery of natural gas from that field to Trinidad. They also signed a technical agreement on oil and gas production in the Punta de Mata area.

The next step in the development of these events was confirmation that the United States and Venezuela have formally agreed to resume diplomatic and consular relations effective March 6, 2026. This restoration follows a significant political change in Venezuela, stemming from the arrest of Nicolás Maduro in January 2026 and the formation of a transitional government headed by interim president Delcy Rodríguez.

The official declaration ends a seven-year period of rupture that began in 2019. Beyond the usual functions of embassies and consulates, the consequences of this announcement raise important questions given Venezuela's unique legal situation. Since 2019, the U.S. government has not recognized either the Maduro regime or the interim government headed by Delcy Rodríguez. As is well known, this lack of legitimacy for Maduro led the National Assembly in 2015 to appoint an interim president, Juan Guaidó, and subsequently to create a sort of interim government that held the representation of Venezuela in the United States and other jurisdictions; later, the 2015 National Assembly assumed that representation, a role it has held until now.

This framework enabled the implementation of various legal, administrative, and financial measures to protect Venezuelan assets abroad. These actions included the appointment of an Ad Hoc Board of Directors for PDVSA, the Central Bank of Venezuela (BCV), and other entities, which, in turn, appointed, for example, directors of the companies holding shares in CITGO, the most valuable Venezuelan company outside of Venezuela. The CITGO case is of particular interest, as this company was financially and operationally recovered and defended against creditor claims, with the legal backing of the United States government.

The recognition of the Venezuelan government thus creates a dual complexity regarding who now represents Venezuela's interests and who is responsible for continuing to confront the threats that still loom as a consequence of the irresponsible debt incurred by the Chavista regimes. This ambiguity can only be resolved by the U.S. government, when and if it takes the necessary legal action on this matter; according to the expert lawyer José Ignacio Hernández, political declarations alone are insufficient to illuminate the path forward. Hernández also reminds us that, more than assets, what the regime in Venezuela will have to face is the management of a colossal liability of its own making.

On the economic front, although transfers of funds protected and controlled by the US are flowing normally, the auctions continue to be disrupted, affecting the level of control the Central Bank of Venezuela (BCV) has over the foreign exchange market. Foreign currency was again offered close to its market value. The gap between the official and market rates remained above 40%. The official rate closed at 433 Bs./$, a 3% devaluation for the week.

Public spending shows an upward trend and, with the increase in international crude oil prices, its financing will be facilitated.

Meanwhile, gold prices have reached record levels globally, contributing to the revaluation of some international reserves. Prices for the Venezuelan oil basket have risen in tandem with increases in international prices, reaching nearly $60/BBL this week, allowing oil revenues to reach their highest levels since the licensing phase began (November 2022).

The BCV has been busy putting its house in order; as the first evidence of this process, it published for the first time in a long time information on inflation: an annual inflation rate of 618%.

 Oil Operations

Crude oil production remained relatively stable over the past week, while refining output increased due to the greater availability of local crude.

Representatives from the Spanish company Repsol were in the La Ceiba and Tomoporo fields, southeast of Lake Maracaibo, planning their activities there. The Maurel et Prom Maritime 42 drilling rig, already in the Urdaneta Oeste block, will begin operations by repairing existing wells before drilling new ones.

Weekly production was 885 Mbpd, geographically distributed as follows:

·                  West                245      Chevron:102

·                  East                 111

·                  Orinoco Belt    529      Chevron:140

                      TOTAL             885       Chevron: 242

Domestic refineries processed 251,000 barrels per day (251 Mbpd) of crude oil and intermediate products, yielding 81,000 bpd of gasoline and 73,000 bpd of diesel. This increase is the net result of the startup of an additional distillation tower in Paraguaná and the difficulties in maintaining operations at El Palito.

Regarding exports, there are still floating inventories and inventories in various tank yards in the Caribbean, which should enter the sales stream during March and April.

Based on the export plan and the estimated prices for the Venezuelan basket, March revenues could exceed $1.3 billion.

 

[1]: International Analyst

[2]: Nonresident Fellow Baker Institute 

WAR IN THE MIDDLE EAST SHAKES THE OIL MARKET

 El Taladro Azul

M. Juan Szabo [1] y Luis A. Pacheco [2]

Published  Originally in Spanish in  LA GRAN ALDEA 

In the 20th century, it was taken as gospel that political instability in the Middle East drove oil prices higher, primarily because developed nations relied on that region to meet their demand. As the 21st century has unfolded, the pieces on the energy chessboard have shifted to new positions, and market behavior has been very different. However, the large-scale military operation launched by the U.S. and Israel against Iran on the morning of February 28, 2026, and Tehran's immediate response with attacks across the region, put that new market paradigm to the test.

Although the timing of the attack coincides with the Jewish celebration of Purim—commemorating the salvation of the Jewish people from an extermination plot in ancient Persia—and with the month of Ramadan, a pillar of Islam for reflection and closeness to Allah, what is reported is that the long-planned attack was brought forward because a window of opportunity arose to eliminate the high command of the Islamic Republic of Iran.

The Pentagon and the Israel Defense Forces (IDF) have struck ballistic missile sites, nuclear facilities, and command centers of the regime. Israel claims to have carried out "decapitation" strikes against key regime figures, which enabled the elimination of Supreme Leader Ali Khamenei. Israeli intelligence detected a meeting of Khamenei with a significant number of high-ranking regime figures at his residential compound and, immediately, in broad daylight, the Israeli air force bombed the building, killing most of those in attendance. The news was officially announced in Iran, and the process to elect a new leader began.

President Donald Trump, upon announcing the start of the strikes, urged the Iranian people to "take control of your government," declaring that "the time for your freedom has come."

Iran has responded by launching waves of missiles and drones, not only against Israel, but also against U.S. bases in several allied countries: Bahrain, Qatar, UAE, Kuwait, Jordan, and even the British military base in Cyprus, in attacks that are surely part of a pre-determined response. Explosions have also been reported near residential areas in Dubai, Doha, and Kuwait. Iran has declared that all U.S. assets in the region are "legitimate targets."

Most airlines have suspended flights throughout the Middle East, and oil and LNG traffic through the Strait of Hormuz has come to a near standstill, having a considerable impact on the oil market and an even greater one on the liquefied gas market. It is important to note that 30% of globally traded crude passes through the Strait of Hormuz.

 

A Situation That Lays Bare the Market Narrative

The military preparations that have culminated in the attacks, which now draw almost the entire Middle East into the conflict, not only affect but also shape the oil market's perception of the future. Indeed, the military escalation between the U.S. and Iran and its potential impact on oil supply are calling into question the prevailing narrative that a global crude surplus exists. In fact, it is now considered that the recent production increase announced by OPEC+, if it materializes, is at best a counterweight to possible supply disruptions in the region. As if that were not enough, the formal declaration of "open war" between Pakistan and Afghanistan has further complicated the geopolitical situation in the region.

Oil prices thus close out February and begin March on a positive note for petroleum "bulls," with gains during the last trading week of the month, and promise to continue on the same course for the week ahead. Amid this war scenario, OPEC+ announced its decision to increase production by 206 MBPD starting in April, as a measure to mitigate the effects of the regional war. However, the cartel's ability to follow through is questioned.

OPEC+ Production Increase Approved for April 2026

PAÍS	INCREMENTO MBPD	CUOTA MBPD
Arabia Saudita	62	10.166
Rusia	62	9.637
Irak	26	4.299
EAU	18	3.429
Kuwait	16	2.596
Kazajistán	10	1.579
Argelia	6	977
Omán	5	816
Total	206	33.499

 

In any case, both baseline production and potential increases from Persian Gulf countries are subject to the constraints that the Strait of Hormuz may impose, beyond preventing tanker entry into the Gulf, which is already occurring. A buildup of tankers is already visible at both ends of the strait, and insurance companies have limited their coverage for those who decide to transit the Strait of Hormuz. The Iranians are broadcasting messages to vessels urging them not to pass through.

On the same geopolitical plane, events in Iran could reverberate in the other conflict zone, Russia and Ukraine, since the Khamenei regime is one of the main suppliers of military drones to Russia. Indeed, Russia's invasion of Ukraine marked its fourth anniversary: a shameful milestone accompanied by more than one million military and civilian deaths and injuries, and severe deterioration of both countries' economies. Nor should it be overlooked that the U.S. role as mediator in that conflict is losing weight, given its involvement in the Middle East conflict.

A Ukrainian drone attack on a critical pumping station in the Russian region of Tatarstan has disrupted the flow of crude to Hungary and Slovakia via the Druzhba pipeline. The disruption has forced both countries to activate their strategic reserves and seek alternative routes, such as importing non-Russian crude through the Adria pipeline from Croatia.

The global situation is one of extreme danger, as three or perhaps four nuclear-armed powers are involved in these regional conflicts and cannot entirely dismiss the risk of a miscalculation or wrong decision. It must not be forgotten that, although China has said little, a disruption of Iranian crude supply would have a disproportionate impact on its economy.

It is very difficult to speculate about the future of this conflict and its medium-term impact on the energy market—every twelve hours, we are surprised by events that were not on our radar. Nevertheless, President Trump has already hinted that the military operation may last four to five weeks, but that he is prepared for a longer duration.

 

Fundamentals

Given the magnitude of the military conflict that is only just beginning, the week's oil market fundamentals take a back seat to the increase in geopolitical risk, primarily driven by uncertainty.

In any case, we observe that the materialization of the projected increase in oil supplies is being delayed. Likewise, the more modest demand increase forecast by the IEA and banks appears to have diminished. Many analysts have noted both changes. For instance, the highly prestigious investment bank Goldman Sachs raised its Brent crude price forecast by $6, placing it at $60/BBL for the fourth quarter of 2026, even before the weekend's events. Of course, it is also not easy to predict the impact on demand of a sustained rise in energy prices.

OPEC+ is producing below its targets; the producers that analysts had flagged to increase crude supply have barely met the quantitative increases corresponding to the incorporation of newly announced fields. The lack of sufficient investment in base production is manifesting as an increase in decline rates, offsetting gains from new fields, typically in Brazil.

The U.S. keeps its production steady, at least for now. As for its commercial crude inventories, the Energy Information Administration (EIA) reported a significant increase of 16 million barrels. However, there appears to be a methodological issue, as the reports show outsized increases and reductions in inventory in recent weeks. As we indicated last week, we tend to wait for a trend to be established before validating the indicator. In any event, the market showed no reaction to the announcement.

 

Crude Oil Price Dynamics

During the last week of February 2026, oil prices experienced significant volatility, driven primarily by the escalation of geopolitical tensions and the delay or mitigation of the projected overproduction. At the close of the week, prices rebounded strongly following reports of the imminence of multiple military activities.

The situation points to two extreme scenarios: one of a war that could drag on for weeks, causing serious damage to the region's oil infrastructure and thus raising prices considerably; and another in which the Iranian regime falls and, after a chaotic transition, a pseudo-normalcy returns with a relatively rapid return to production levels and, eventually, the lifting of sanctions. In this latter scenario, oil supplies would increase and weigh on prices, with greater volatility and a medium-term reduction.

Benchmark crude Brent and WTI, at market close on Friday, February 27, 2026, were trading at $72.87/BBL and $67.02/BBL, respectively, reflecting an increase of approximately 1.5% compared to the previous week's close.

Note: At press time, Brent crude was trading at $77.47/bbl (+6.31%), having briefly approached $80/bbl during the session.

Venezuela

Recovery Without a Democratic Transition Can Only Be Partial

Although the Venezuelan situation remains dynamic, politically, economically, and in terms of oil, it was overshadowed internationally by the magnitude and potential repercussions of the Middle East conflict.

Political Situation

Politically, ambivalent moments are being experienced regarding repression and human rights. While the release of several imprisoned military personnel was confirmed and the remodeling of the Helicoide prison began for purposes other than detention and torture, at the same time, the regime's repressive forces confiscated the home of one of María Corina Machado's closest collaborators and detained activists from her VENTE party. It would appear that one head of the hydra that is the regime is trying to adapt to U.S. oversight, while another head seeks to maintain control through targeted repression. Nevertheless, protests of a different nature, mainly over wages, have taken place in several states across the country.

At the same time, the Attorney General and the People's Ombudsman, the main instruments of judicial repression, submitted their resignations, possibly as part of the transformation the regime seeks to project. Likewise, the interim president dismissed Alex Saab's wife from her ministerial post. According to rumors, other reshuffles may be in the works involving Interior Minister Diosdado Cabello and Defense Minister General Vladimir Padrino.

Somewhat surprisingly, at the annual "State of the Union" address, President Trump, in his now-familiar practice of highlighting key personalities to underscore annual achievements, introduced Enrique Márquez, one of the marginal candidates in the 2024 presidential elections and former vice president of the National Electoral Council (CNE). Márquez attended as a guest of honor, having recently been released from detention in Venezuela. 

Several theories arose from this introduction: one that he was being presented as a qualified candidate to head a new CNE, and another that he was being positioned as a transitional figure until the general elections. The latter would clearly not sit well with the opposition, which represents the majority of Venezuelans. Still, it could be a card played by the interim regime and the "opposition" represented in the National Assembly, to divide and weaken the majority opposition.

Economic Situation

On the economic front, some progress was made, though not without setbacks. The International Monetary Fund (IMF) classified Venezuela as a country of "intense fragility," an unflattering designation but useful for accessing special emergency financing and enabling certain financial transactions. These allowances are attributed to the stewardship of Treasury Secretary Scott Bessent.

Nearly $950 million was auctioned between January and February, with some difficulties in meeting the requirements of all phases of the fund flow. To reduce complications, hydrocarbon sale revenues will no longer need to pass through Qatar; they will flow directly to protected accounts at the U.S. Treasury Department. In fact, part of the March deliveries has already been received. 

Delays in implementing the foreign exchange auctions made it difficult to close the gap between the official and market exchange rates; despite the auctions being conducted at rates very close to the parallel market rate, the gap remained above 40%. The official rate closed the week at 420 Bs./$, representing a 4% weekly devaluation and 39% so far this year.

The most relevant news from an oil perspective were: first, the suspension of the auction of equipment belonging to U.S. company Halliburton that had been confiscated—the change came as a result of U.S. intervention to facilitate the smooth return of one of the largest and most wide-ranging service companies in the world; and second, the rumor of the suspension of 19 production sharing contracts (CPPs) signed before January 3, mostly awarded by Delcy Rodríguez.

 Apparently, the suspension may be due, among other reasons, to the contractors' financial and operational capacity and the origin and relationships of their owners and shareholders, which prevent these agreements from qualifying for OFAC-issued licenses. It is rumored that the review of the contracts is being conducted by a working group comprising U.S. Treasury technicians and PDVSA personnel.

It is thus clear that production increases over the coming months will be limited to investments made by currently active companies: Chevron, Repsol, Maurel & Prom, and possibly ENI, which is still weighing its options. In the specific case of Maurel & Prom, the recovery could be faster than anticipated, given that the first rig, the Maritime 42, has already been refurbished and is on its way to Urdaneta Oeste.

 

Oil Operations

Production was partially affected by power outages, unlike refining, which increased compared to the previous week. Representatives of Halliburton and other service companies have been establishing contacts with local firms to incorporate them into activities in the hydrocarbon sector and related activities.

Representatives of Shell met with the interim president to accelerate the development of the Dragon Field to supply natural gas to Trinidad, specifically to the Atlantic LNG plant. Shell indicated that its objective is to bring the field into production by the end of 2027.

Weekly Production

Occidente	243 Mbpd (Chevron: 102)
Oriente	111 Mbpd
Faja del Orinoco	526 Mbpd (Chevron: 138)
TOTAL	880 Mbpd (Chevron: 240)

 

National refineries processed 237 Mbpd of crude and intermediate products, yielding 79 Mbpd of gasoline and 70 Mbpd of diesel. The increase is mainly due to the startup of the distillation unit at El Palito.

According to the U.S. Secretary of Energy, by the end of February, revenues from the sale of Venezuelan hydrocarbons totaled $2.3 billion, averaging $53/bbl.

Among the notable features of February exports is the first Chevron sale outside U.S. territory, with a cargo sold to India. Additionally, 80 MBPD was sent to Europe and 20 MBPD to Israel. Chevron's total sales were 270 Mbpd, accounting for 36% of total exports of 736 Mbpd in February. However, 160 Mbpd dispatched remains as floating inventory and will therefore have no impact on revenues.

The increase in international prices raised the Venezuelan basket price to $59.2/BBL.

[1]: International Analyst
[2]: Nonresident Fellow Baker Institute