Hello Power Up readers,
It once again feels more like wartime than peacetime in the Middle East, as U.S. and Iranian forces exchanged heavy missile and drone assaults overnight. Tehran targeted U.S. facilities in states across the Gulf and said it had once again closed the vital Strait of Hormuz, sending oil prices higher.
This is the sixth straight day of violence in the region, leaving the June 17 U.S.-Iran ceasefire deal in tatters. In the past week, U.S. President Donald Trump has said he considers the ceasefire over, though he left the door open to more talks. On Sunday, Trump said in a phone call with Reuters: “We're beating them up.”
As we’ve highlighted in recent weeks, the conflict is now almost entirely centred on the status of the narrow waterway that transported a fifth of the world’s oil and gas supplies before the war. While Iran wants to establish a permanent system to collect fees in the strait, the U.S. and Gulf countries insist on free passage. Officials from Iran and Oman, which share the strait’s coastlines, met over the weekend to discuss ways to permanently reopen the strait, but no progress appears to have been made.
A trickle of tankers continues to flow through Hormuz, though the number is unclear since some vessels switch off their transponders to avoid detection. One thing is certain – oil and gas flows from the Gulf are a fraction of what they were before the war.
So for now, the world continues to muddle through, tapping storage which is running thin after four-and-a-half months of disruption. Europe has less than a month of aviation fuel supplies, Reuters reported, a bleak prospect as we enter peak summer travel season.
Zooming out from the Hormuz tensions, the battlefields of the Middle East, Ukraine and Russia are showing how cheap, mass-produced drones have transformed modern warfare, exposing critical energy infrastructure as modern economies’ Achilles' heel. The implications for the energy industry are profound. More on this below.
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