Kyobo Securities assessed on the 23rd that global energy markets have become more vulnerable to oil price increases than in March during the Strait of Hormuz blockade, as buffer mechanisms have been exhausted. Senior researcher Wi Jae-hyeon stated the second shock from prolonged dual-strait closures—Hormuz and Bab-el-Mandeb—would exceed March impacts, with Q3 oil prices risking a climb to $160 per barrel. The analysis comes as US-Iran conflict reignited and pro-Iran Houthi forces in Yemen declared intent to block the Bab-el-Mandeb Strait connecting the Red Sea and Indian Ocean, eliminating Saudi Arabia's western pipeline bypass route used during the Hormuz closure.
International oil prices rebounded 25% from recent lows on a West Texas Intermediate (WTI) crude basis as the US and Iran resumed armed clashes. The Houthi declaration introduced a new variable—Saudi Arabia had previously circumvented the Hormuz blockade by transporting crude westward through its east-west pipeline, but a Bab-el-Mandeb closure would eliminate this alternative.
Dual-Strait Blockade Adds 4% Supply Disruption to Hormuz 15% Shortfall
Wi Jae-hyeon calculated that if the Strait of Hormuz blockade creates a 15% global oil supply shortfall, a Bab-el-Mandeb closure would generate an additional 4% disruption. The researcher stated in the report that "the impact of a second shock will be greater than in March if both straits remain blocked long-term."
![Kyobo Securities energy market analysis chart]()
Exhausted Buffer Mechanisms Push Oil Price Ceiling to $150-160 Per Barrel
Wi Jae-hyeon projected the geopolitical risk-driven oil price ceiling would exceed levels seen during the initial Hormuz blockade, citing depleted stabilization buffers. He explained, "Factors that controlled oil price increases were global strategic reserve releases, China's sharp crude demand decline, Saudi bypass exports, and Asian countries' coal switching and fuel conservation—current additional capacity is limited." The analyst diagnosed that "if both straits enter a prolonged blockade phase, international oil prices could rise to a maximum of $150-160 per barrel."
The researcher identified four exhausted buffer mechanisms: worldwide strategic petroleum reserve drawdowns completed, Chinese crude oil demand already collapsed, Saudi Arabia's western export route capacity fully utilized during March, and Asian nations' coal conversion and conservation measures already implemented.
Refining Margin Surge Pressures Consumer Inflation Despite Conflict Resolution
Wi Jae-hyeon analyzed that surging refining margins add consumer price pressure beyond crude oil costs. Russian refineries sustained damage from the Russia-Ukraine war, degrading diesel refining capacity, while refiners lost incentive to produce gasoline due to lower profit margins compared to diesel and jet fuel. The researcher stated, "Even if the US-Iran war subsides within Q3, high refining margins will likely keep US consumer prices anchored at elevated levels in the mid-to-high 3% range."
![Kyobo Securities refining margin analysis chart]()
Bab-el-Mandeb Threat Forces Saudi Arabia Atlantic Detour and Shipping Cost Increase
If Houthi forces materialize the Red Sea blockade, Saudi Arabia must reroute crude exports to Asian countries through the Suez Canal and Atlantic Ocean in a major detour, inevitably raising maritime freight rates. Wi Jae-hyeon noted this would pressure domestic consumer prices in South Korea without an extension of the petroleum price ceiling system.
The researcher concluded, "The Bab-el-Mandeb Strait blockade threat has amplified crude market vulnerability. While the oil market will revert to oversupply once geopolitical risks subside, preparation for short-term oil price increase risks remains necessary."
FAQ
What did Kyobo Securities assess about energy market conditions on the 23rd?
Kyobo Securities senior researcher Wi Jae-hyeon assessed on the 23rd that global energy markets have become more vulnerable to oil price increases than during the March Strait of Hormuz blockade, as buffer mechanisms including strategic reserve releases, China demand decline, Saudi bypass capacity, and Asian coal switching have been exhausted. The report stated prolonged dual-strait closures could push Q3 oil prices to $150-160 per barrel.
How much additional supply disruption would a Bab-el-Mandeb Strait closure create?
Wi Jae-hyeon calculated that a Bab-el-Mandeb Strait blockade would generate a 4% additional global oil supply disruption on top of the 15% shortfall from the Strait of Hormuz closure. The researcher stated the combined impact of both straits remaining blocked long-term would exceed the March shock, as Saudi Arabia's western pipeline bypass route would also be eliminated.
What refining margin impact did Kyobo Securities identify?
Wi Jae-hyeon analyzed that refining margins surged due to Russian refinery damage from the Russia-Ukraine war degrading diesel capacity, while refiners lost gasoline production incentive due to lower profit margins versus diesel and jet fuel. The researcher stated this would keep US consumer prices at elevated mid-to-high 3% levels even if the US-Iran conflict resolves within Q3.
