The War Extends to Natural Gas Production Assets

 El Taladro Azul

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

Published  Originally in Spanish in  LA GRAN ALDEA 

Unlike the 20th-century political crises in the Middle East, which were reflected in oil prices, the fundamental change in the global energy matrix has made natural gas and its Siamese twin, liquefied natural gas (LNG), key pieces on the region's energy political chessboard and in global geopolitics.

The situation in the Strait of Hormuz has gone from a rhetorical threat to a real operational crisis, resulting in a historic disruption to the global hydrocarbon market. American efforts to force Iran to allow free navigation in the strait degenerated into the destruction of oil and gas assets in Iran and other Persian Gulf countries.

Israeli bombings against Iran's gigantic South Pars gas field, as well as Iran's response by bombing the even more extensive North Dome field in Qatar, have caused damage to the global LNG supply infrastructure that will take years to repair. Damage to refineries in Saudi Arabia, Bahrain, and Israel is already unbalancing product supplies, particularly aviation fuel.

Oil markets continued their fifth consecutive week of gains, with Brent trading near $112 per barrel. The Trump administration has attempted to calm market concerns by all available means: exempting the administration from the Jones Act; further softening sanctions on Russia; lifting sanctions on Iranian oil transported by sea; and draining crude from strategic reserves. However, market perception focuses on the fact that the Strait of Hormuz is closed to most non-Iranian navigation and that natural gas liquefaction in Qatar and Iran is inactive. Since the war began, barely 100 tankers have successfully crossed the strait, when normally that would be the daily traffic volume.

Iran's Revolutionary Guard maintains physical control of Hormuz, allowing passage only to vessels from countries considered "non-enemies," such as China or Turkey, after specific diplomatic negotiations.

Geopolitical Fundamentals

Elimination of Iranian Commanders and Military Response

Israel continued its strategy to eliminate senior commanders of the Iranian regime. This time it was Ali Larijani, the security chief, whose death Iran confirmed last night. Larijani took the reins of Iran after the death of Supreme Leader Ali Khamenei, wielding more power than President Masoud Pezeshkian, who has a more diplomatic profile and even more influence than the recently appointed Supreme Leader, Mojtaba Khamenei.

Larijani was one of the architects of Iran's defense and retaliation strategy in the current war. However, it is believed that the military campaign could continue its course despite his absence, as the regime has prepared up to four levels of succession for each government and military command post, so that command and control structures can continue despite Israeli "targeted attacks."

The Iranian military declared over the weekend that it is ready to close the Strait of Hormuz indefinitely if U.S. President Donald Trump follows through on his threat to bomb its power plants. On the other hand, an Iranian source told CNN that Tehran is advancing in the monetization of its control over this vital waterway.

U.S. forces have repeatedly attacked Iranian ships tasked with placing mines in and near the strait. General Dan Caine, Chairman of the Joint Chiefs of Staff, reported that approximately 44 were destroyed as of March 18. He also reported that they have used low-flying aircraft, Apache helicopters, and precision air strikes—including bunker-buster bombs—against ships, coastal launch points, and infrastructure that could support anti-ship missile and drone attacks against vessels.

In parallel, the Pentagon has ordered the deployment of marines and amphibious warships, including the USS Tripoli with elements of the 31st Marine Expeditionary Unit (approximately 2,500 marines), to the Middle East to position off the coast as a rapid-crisis-response and maritime-security force. All these maneuvers seek to give commanders options for evacuation, boarding, and escort missions, as well as limited littoral operations, without committing large ground forces in Iran. However, they add to the conflict's escalation.

Impact on Maritime Transport and Production

Meanwhile, a large number of vessels have been immobilized or forced to divert due to threats and direct attacks against oil tankers. As expected, ship fuel prices have surged 87% since the start of hostilities, to levels not seen since the beginning of the Ukraine invasion in 2022.

Unable to export or store more crude, key producers such as Saudi Arabia, Iraq, and Kuwait have had to shut down production, reducing capacity by about 8.5 million barrels per day. Likewise, all LNG production in the region is out of service and will require major maintenance to return to operation. This has doubled, and even tripled, gas prices in Europe and Asia, threatening electricity generation and fertilizer production, with consequences throughout the global production chain.

Palliative Measures and Alternative Routes

Faced with this crisis, a set of palliative measures is being implemented. The International Energy Agency (IEA) has coordinated the largest crude reserve release in history: 400 million barrels (400 MMbbl), providing about 3.3 million barrels per day (3.3 MMbpd) to the system—a figure insufficient to cover the massive deficit and of little effect if the conflict drags on.

On the other hand, pipelines that bypass the Strait of Hormuz have a capacity of only 5 million barrels per day. However, their usefulness is being called into question by Iranian attacks on infrastructure, such as the port of Fujairah in the Gulf of Oman and the refinery on the outskirts of the Yanbu terminal on the Red Sea, which reduce their operability.

Additionally, an Iranian military source warned that new U.S. attacks or an invasion of Kharg Island—its largest loading and storage terminal—could prompt Tehran to intensify the situation, threatening nearby waterways, including the Red Sea and the Bab al-Mandab strait. It should be remembered that Yemen's Houthis reduced transit through Bab al-Mandab to a minimum in recent years. At the same time, Iran allows the passage of some vessels linked to China, India, and Pakistan through diplomatic negotiations, while maintaining the blockade for the rest of international traffic. Even the passage of a tanker bound for India, escorted by a vessel from that country's navy, was observed.

Global Economic Impact

The results of this crisis are difficult to estimate beyond the obvious havoc caused by increased energy costs and supply shortages. The World Trade Organization (WTO) and the International Monetary Fund (IMF) have warned that this conflict will hit global growth in 2026 and raise inflationary pressure. The impact is already visible in capital market indices: the S&P 500 and Dow Jones have lost nearly 6% of their value in the first three weeks of March. European Central Bank President Christine Lagarde highlighted that, in an adverse scenario, eurozone inflation could spike to 3.5%, well above the previously forecast 1.9%, and growth would be 0.6%.

Some analysts predict that the supply-demand balance will only be achieved through "demand destruction": prices rise so much that consumers are forced to reduce consumption due to unaffordability or economic viability.

Regional Exposure

Asia is the most vulnerable region, as it imports 80% of the oil that transits through the strait. Countries like Thailand, South Korea, and Japan face the risk of an immediate recession. China, for its part, is reducing petroleum product exports to strengthen internal energy security, although its strategic reserves allow it, for now, to weather the supply storm.

While Europe faces a critical shortage of distillates—diesel and jet fuel—and natural gas, it competes with Asia for Atlantic cargoes.

Exporting countries outside the Gulf—Russia, Venezuela, and the United States—have emerged as temporary beneficiaries, as demand is redirected toward their supplies and their product prices are lower.

Price Dynamics

The market, which had an unprecedented bearish speculative positioning before hostilities, now registers, with the war and the closure of Hormuz, intense covering of short positions. Likely, a substantial part of the rally toward $120/bbl was driven by margin calls and the forced liquidation of speculative short positions. In recent days, several reports have circulated describing how hedge funds have completely closed their energy trading desks. The increase in natural gas prices responds entirely to signals of a supply shortage.

During the week, crude and gas prices experienced high volatility and a strong upward trend, with Brent remaining above $100/bbl.

The immediate future, fraught with uncertainty, has propelled prices to current levels and could catapult them to $130-$200/bbl if the Hormuz closure is prolonged. None of the measures implemented or suggested to mitigate the situation has sufficient substance to generate confidence in future energy security.

At Friday's market close on March 20, 2026, the Brent and WTI benchmark crudes were trading at $112.19/bbl and $98.23/bbl, respectively, reflecting an increase of more than 8% for Brent compared to the previous week's close and a wider differential between the two.

Venezuela

The Illness Does Not Respond to Treatment

The so-called stabilization and recovery stages, nominally under American tutelage, have not reached expected levels, particularly from the perspective of the average citizen's daily life. International geopolitical dynamics have driven prices for the Venezuelan basket to levels not seen in some time; however, the current income flow scheme and fragmentation in the delivery of foreign currency through auctions scheduled by the BCV have not allowed effective control of the foreign exchange market.

On the other hand, during the purification process of oil block concession mechanisms, several blocks were assigned. Still, a lack of transparency and clarity in contract content persists, similar to what occurred during the Anti-Blockade Law era. This is no surprise; the Hydrocarbon Law reform has left too many loose ends in this regard.

Likewise, the interim president has continued to replace Maduro administration ministers with people close to her political circle, but whose records of action in the administration, repression, and human rights are similar to those of previous officials. That Washington appears to approve, through its silence, this decision of "continuity" could be justified by the need to ensure full compliance with tutelage plans and to prevent over-interference in appointments from being used by the Caracas regime as a possible excuse to fail to meet objectives.

One of these areas that has remained far from outlined objectives is the release of political prisoners, a process that has slowed down. The bet is that, with recent appointments, the government will demonstrate it can advance in matters like this.

Foreign Exchange Market

The foreign exchange market failed to reduce the gap between official and market rates. At the close of operations, the official rate stood at 457 Bs./$ and the gap was 43%. The government expects to receive additional funds in March, given that the $500 million had already been auctioned and sales revenues were estimated to be much higher than in previous months.

Under the new General License 52, a form of sanctions flexibility was announced, allowing only companies domiciled in the U.S. to sign contracts with PDVSA, subject to certain limitations on the flow of generated funds. Chevron and other companies would not use bank money desks to pay amounts corresponding to royalties and operational requirements. Under the new scheme, everything must go through accounts controlled by the U.S. Treasury.

Oil Operations

Weekly Production

Production remained stable during the past week. Weekly production was 883 Mbpd, geographically distributed as follows:

• West: 244 Mbpd (Chevron: 101 Mbpd)
• East: 111 Mbpd
• Orinoco Belt: 528 Mbpd (Chevron: 140 Mbpd)

TOTAL: 883 Mbpd | Chevron: 241 Mbpd

Refining and Exports

National refineries processed 230 Mbpd of crude and intermediate products, yielding 73 Mbpd of gasoline and 71 Mbpd of diesel.

Exports so far this month appear to be above planned levels; if the current dispatch rate is maintained, they could approach 800 Mbpd.

The Venezuelan basket price reached $86/bbl, the highest in recent years. With the planned export and current international market prices, oil revenues will tend to reach $2,000 million in March.

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

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