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
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