CICC Wealth Futures: Disruption of oil supply in the Strait of Hormuz causes losses exceeding the 1973 oil crisis; oil prices may surge significantly due to supply and demand imbalance

The ongoing disruption of oil transportation through the Strait of Hormuz has caused a severe systemic impact on global energy supply. The International Energy Agency (IEA) states that the current loss of crude oil supply has exceeded the level during the 1973 oil crisis, and restoring navigation through the Strait of Hormuz is crucial for stabilizing the oil market. In response, President Trump plans to organize the U.S. Navy to conduct escort operations in cooperation with allied countries; however, no country has yet committed to deploying warships to the Strait of Hormuz. The International Maritime Organization (IMO) says that deploying warships for escort cannot guarantee 100% safety for ships passing through the Strait of Hormuz, and military assistance is not a sustainable solution. The narrowest part of the Strait of Hormuz is only about 30 kilometers wide, with even narrower routes for VLCCs and LNG ships. Facing threats from Iranian missiles, drones, speedboats, and mines, the reaction time for warships is extremely limited, and technically, escorting ships involves significant risks. The scale and duration of this global oil supply disruption are so large that markets are struggling to find effective alternatives, meaning that the sharp rise in oil prices is no longer just risk premium but a re-pricing of the market’s medium- to long-term supply and demand balance. (CICC Wealth Futures)