To The Moon

According to informed sources, Saudi Aramco has suspended operations at its Ras Tanura refinery following a drone attack on the facility. The Ras Tanura refinery is one of Saudi Arabia's largest, with a crude processing capacity of 550,000 barrels per day. The sources indicated that the facility, located on the Persian Gulf coast, was preemptively shut down early Monday as Saudi Aramco assesses the damage. They requested anonymity as the information is not yet public. They also stated that a fire at the site has been brought under control. This incident is part of a series of chain reactions triggered by the ongoing conflict in the Middle East. After the US and Israel struck Iran over the weekend, Iran retaliated by launching hundreds of missiles and drones at targets in multiple regional countries. Attacks on major energy infrastructure represent a nightmare scenario for oil markets, and as tensions escalate, shipping through the critical Strait of Hormuz has nearly ground to a halt. Driven by the US-Israeli strikes on Iran leading to a de facto closure of the Strait of Hormuz and the escalation of regional conflict, international oil prices recorded their largest single-day gain in four years. The global benchmark Brent crude surged more than 9%, approaching $80 per barrel, after climbing as much as 13% intraday to its highest level since January 2025. The Strait of Hormuz is a vital chokepoint off the coast of Iran, handling approximately 20% of global oil shipments and significant volumes of natural gas. As the conflict spreads, shipowners and traders have independently suspended transit, bringing tanker traffic through the strait to a virtual standstill. In the latest developments, beyond the shutdown of Saudi Arabia's largest refinery, the Iranian military reported on the 2nd that three US and UK-flagged tankers were attacked in the Persian Gulf and the Strait of Hormuz. Kuwait's defense ministry stated that several US military aircraft had crashed, corroborating earlier Iranian claims that an American F-15 fighter jet attempting to violate Iranian airspace was tracked and shot down by Iranian air defenses. Residents in Dubai and Abu Dhabi reported hearing explosions, while AFP reported thick smoke rising from the US embassy in Kuwait City. In Lebanon, Hezbollah, an Iranian proxy, launched attacks against Israel. This conflict marks a dangerous new phase for global oil markets. Last Saturday, the US and Israel launched missile strikes against targets across Iran, simultaneously urging the Iranian people to overthrow the Islamic regime. Iran responded with a wave of strikes on targets in Israel, US military bases, and countries including Saudi Arabia, Qatar, the UAE, Kuwait, and Bahrain. Iran's Supreme Leader Ayatollah Khamenei was killed. Refined product prices rose in tandem with crude oil, with diesel futures climbing as much as 20%. Iranian authorities claimed on Sunday that the Strait of Hormuz remained open, but also confirmed attacks on three tankers. Concurrently, former President Trump stated that US forces had sunk nine Iranian naval vessels and that military operations would continue until all objectives were achieved. Haris Khurshid, Chief Investment Officer at Karobaar Capital, commented, "If tanker traffic resumes swiftly, a credible de-escalation emerges, or back-channel diplomatic talks occur, oil prices could retreat. Otherwise, prices may consolidate at elevated levels." In response to the expanding conflict, OPEC+ agreed during its regular meeting over the weekend to increase its production quota by 206,000 barrels per day next month. Iran, Saudi Arabia, and Russia are all members of the group, and even before the conflict erupted on Saturday, markets had anticipated a modest production increase. Influenced by persistent geopolitical tensions and a series of localized supply disruptions, crude oil has posted gains for two consecutive months this year. This upward trend occurred despite widespread market expectations that increased output from both OPEC+ and non-OPEC+ producers would lead to a significant market surplus. In a report issued before markets opened on Monday, analysts including Max Layton from Citigroup stated, "In our base case, we expect Brent crude to trade in the $80-$90 per barrel range for at least the next week." They added, "Our baseline judgment is for a leadership transition in Iran, or sufficient regime change to halt the war within one to two weeks, or for the US to decide to de-escalate upon seeing leadership change coupled with significant damage to Iran's missile and nuclear programs." Morgan Stanley has raised its second-quarter Brent crude forecast from $62.50 per barrel to $80 per barrel. Iran produces approximately 3.3 million barrels of oil per day, accounting for about 3% of global supply, but its influence on energy supplies is magnified due to its strategic control over the Strait of Hormuz. Oil from the Persian Gulf must transit this strait to reach major markets like China, India, and Japan. In an interview with The New York Times, former President Trump stated that US plans for strikes on Iran would last "four to five weeks." He also expressed willingness to lift sanctions if a new Iranian leadership demonstrates a pragmatic and cooperative approach. Wood Mackenzie warned that oil prices could surpass $100 per barrel if tanker traffic through the Strait of Hormuz does not resume quickly. The consultancy noted that even if OPEC+ increases production in April, the additional output and spare capacity cannot be exported if the strait remains closed. Analysts at J.P. Morgan indicated that if the strait were closed for 25 days, major Middle Eastern oil producers might be forced to shut in production as onshore storage tanks and floating storage facilities reach capacity. A sustained spike in energy costs risks exacerbating global inflationary pressures. This would complicate the task for central banks like the Federal Reserve, which must balance controlling inflation against supporting economic growth and employment. Prior to the onset of war with Iran, the Trump administration's foreign policy had grown increasingly assertive. In late January, US forces conducted a raid in Venezuela to seize control of then-President Maduro, after which the US government took control of the country's oil industry.