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
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