Charles Kennedy
The Strait of Hormuz may be one of the most strategically sensitive energy corridors in the world, but the oil market isn’t blinking, yet, with Eni CEO Claudio Descalzi predicting Iran will not be able to afford this option.
Brent’s muted response at around $77 per barrel on Wednesday, signals that traders see the odds of an actual closure as remote, despite intensifying hostilities between Iran and Israel.
“It would be very difficult to stop the Strait of Hormuz, because everybody would be affected, including Iran,” Descalzi told Reuters on the sidelines of an industry event. “I think they are more rational than that.”
It’s a risky bet. Roughly 20% of the world’s oil and LNG pass through this narrow maritime bottleneck. Iran has rattled sabers before, but never followed through. Descalzi argues it would be self-defeating: Tehran’s own exports would suffer, and the U.S. would not sit idly by.
Still, market complacency is being tested. Freight rates for tankers surged 40% in five days, showing risk premiums are creeping in. That’s no surprise: a single incident could roil flows overnight.
Some analysts warn prices could spike $30 in a worst-case scenario, with Asian refiners hit hardest. That includes China and India, who consume the lion’s share of Gulf exports. They’re quietly reshuffling trade routes and eyeing West African barrels and longer-haul contracts.
For Eni, the Middle East instability lands as it tries to reshape itself. The company is pushing a €2 billion capital raise by selling part of its Plenitude renewables unit, redirecting cash toward biofuels and low-carbon hydrogen.
Descalzi’s warning underscores how markets are pricing in rational restraint, but regional buyers aren’t taking chances. Indian refiners have already ramped up purchases from Russia and the U.S. for June to offset potential Gulf disruptions.
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