Morning Highlights: Oil Surges Back Above $96 as Iran Attacks Tankers in Iraqi Waters; IEA Calls It Largest Supply Disruption in History, China Bans Fuel Exports

Thursday, March 12, 2026

MARKET SNAPSHOT

Oil surged sharply as Iran escalated attacks on shipping and energy infrastructure across the region, shattering any hope that Trump's "we won" rhetoric would lead to a quick resolution. Brent crude climbed $4.45 to $96.43/bbl by 6:30 AM EST, having touched $100 earlier. WTI gained $3.85 to $91.10/bbl. The IEA declared this the biggest oil supply disruption in the history of global markets.

Iran is executing a deliberate strategy to impose prolonged economic shock. Explosives-laden boats attacked two tankers in Iraqi waters overnight, setting them ablaze and killing a crew member. Three other ships were struck in the Gulf. Iran's military spokesperson said the world should prepare for $200 oil. The 400 million barrel SPR release announced yesterday has done nothing to calm the market. As ING said: "The only way to see oil prices trade lower on a sustained basis is by getting oil flowing through the Strait of Hormuz. Failing to do so means that the market highs are still ahead of us."

________________________________________

TOP DEVELOPMENTS

IEA: Largest Oil Supply Disruption in History The IEA said in its monthly report that the Middle East war is causing the biggest oil supply disruption in the history of global markets. Gulf countries have cut total oil production by at least 10 million bpd, nearly 10% of world demand. This surpasses 1973, 1979, and 1990 by a wide margin.

We called this crossing the line from geopolitical shock to energy crisis last week. The IEA has now made it official. The 400M barrel SPR release, while the largest ever, covers approximately 90 days at an estimated 4.5M bpd flow rate as per sources. That replaces less than half the 10M+ bpd shortfall. The release buys time but does not solve the fundamental problem: Hormuz is closed and Iran intends to keep it that way.

Iran Escalates: Tankers Ablaze in Iraqi Waters, Five Ships Hit in One Day

Two tankers were set ablaze in Iraqi waters by Iranian boats laden with explosives, killing at least one crew member. Reuters-verified images showed massive fireballs visible from the shore of Basra. Hours earlier, three ships were struck in the Gulf, including a Thai bulk carrier that the Revolutionary Guards said had "disobeyed their orders." A container vessel was also hit near the UAE. IG's Sycamore called the Iraqi tanker attacks "a direct and forceful Iranian response" to the SPR release announcement.

Iran is demonstrating it can strike shipping well beyond Hormuz, deep into Iraqi waters near Basra. This threatens the last remaining Gulf export infrastructure that doesn't transit the Strait. Combined with Wednesday's strikes on Bahrain fuel tanks, Oman's Salalah port, and continued drone attacks toward Saudi Shaybah, Iran is systematically targeting every energy node in the region.

Iran's Strategy: Prolonged Economic Shock

Iran has made its strategy explicit over the past 48 hours. The IRGC says it will not allow oil through Hormuz until attacks cease and refuses to negotiate with Washington. Iran's military spokesperson said the world should prepare for $200/bbl oil. Iran now considers banks legitimate targets and warned Middle East residents to stay 1,000 meters from them (Citibank shut UAE branches, HSBC shut Qatar branches).

Three U.S. intelligence sources told Reuters that Iran's leadership remains largely intact and is not at risk of collapse. Trump's "we won" and "virtually destroyed Iran" rhetoric does not match the intelligence assessment. Iran is absorbing strikes and responding asymmetrically through Hormuz closure, tanker attacks, drone swarms across six countries, and economic warfare. This is a strategy designed to outlast U.S. political will, not match U.S. military power.

China Bans Refined Fuel Exports

China's NDRC ordered an immediate ban on refined fuel exports in March, covering gasoline, diesel, and aviation fuel, including cargoes that hadn't cleared customs as of March 11. This goes well beyond last week's guidance urging refiners to cancel commitments. Traders had forecast March fuel exports at 2.2-2.3 million tons. Those barrels now stay in China.

This is the most consequential downstream development since the war began. China is the world's biggest oil importer and a major fuel exporter. Pulling 2.2-2.3 million tons of monthly product exports off the market removes one of Asia's last remaining supply buffers. Regional refiners were already shutting units for lack of crude. Now the product that was being produced can't leave China either. Asian product markets (jet fuel already up 140%, diesel at multi-year highs) will tighten further.

Hezbollah Launches Largest Rocket Salvo, Houthi Threat Rising

Hezbollah launched its biggest rocket salvo of the current war Wednesday night, prompting Israeli strikes that shook Beirut. The attack raised fears about Yemen's Houthis joining alongside Iran, which would further disrupt Red Sea shipping, the alternative route Gulf producers have been using to bypass Hormuz.

If Houthis activate in the Red Sea alongside the Hormuz closure, Saudi Arabia's Yanbu exports and Sumed Pipeline flows through Egypt become threatened. That would close the last remaining export route for Gulf crude and could push the disruption from 10M bpd toward the 15M bpd Wood Mackenzie estimated, making the $150 scenario real.

Goldman Revises Again: $98 Brent for March/April, $110 in Upside Scenario

Goldman now forecasts Brent averaging $98 in March and April before declining to $71 by Q4, but warns an upside scenario with month-long Strait disruption could push the average to $110. They maintain $66 Q4, implying they still expect resolution and surplus reassertion.

Goldman's Journey: $54 Q4 (January) → $60 (late February) → $66 (early March) → $98 near-term with $110 upside risk. Each revision chases reality higher. The $66 Q4 target requires Hormuz reopening, Gulf restarts, and normalization within months. Iran's stated strategy is to prevent exactly that.

Trump's "We Won" vs. Reality

Trump told a rally in Kentucky: "You never like to say too early you won. We won. In the first hour it was over." He also said the U.S. had "virtually destroyed Iran." But he added: "We don't want to leave early do we? We got to finish the job." Three intelligence sources say Iran's leadership is largely intact. Iran is hitting targets across six countries and has closed the world's most important energy chokepoint. The disconnect between rhetoric and reality is the widest it's been since the conflict began.

________________________________________

BOTTOM LINE

Day fourteen. The IEA has officially declared this the largest oil supply disruption in history. Ten million bpd of Gulf production offline, Hormuz closed, tankers burning in Iraqi waters, China banning fuel exports, Hezbollah's largest rocket barrage raising the specter of Houthi Red Sea involvement. And the record 400M barrel SPR release barely registered.

Iran's strategy is now crystal clear: impose maximum economic pain globally to force Trump to stop. The $200 oil warning, the bank targeting threats, the systematic strikes across six countries, the refusal to negotiate. This is not a country on the verge of collapse regardless of what Trump says at rallies. U.S. intelligence confirms Iran's leadership is intact. The IRGC controls Hormuz and has demonstrated it can strike shipping anywhere in the Gulf, including deep into Iraqi waters.

The China fuel export ban is the development that tightens the noose on global product markets. 2.2-2.3 million tons of monthly exports removed. Asian refiners already cutting runs for lack of crude. India's MRPL already halted exports. Now China's barrels stay home too. The product market crisis (jet fuel +140%, diesel at multi-year highs, European gasoil margins at 2022 levels) is about to get worse.

The Hezbollah escalation is the risk the market hasn't fully priced. If Houthis join and threaten Red Sea shipping, Saudi Arabia's Yanbu lifeline closes. That takes the disruption from catastrophic to unprecedented. Every barrel of Gulf crude would be effectively stranded.

Goldman's $98 March/April average and $110 upside scenario are the new framework, but even those may prove conservative if Hormuz stays closed through April. Their $66 Q4 assumes resolution. ING says market highs are still ahead of us without Hormuz reopening. At $96 Brent, the market is pricing a crisis that ends. Iran is telling you it won't. The spread between those two views is where the next $20-30 of price movement lives. Watch for any genuine ceasefire signals (not Trump rally rhetoric), Houthi activation in the Red Sea, and whether the SPR release flow rate can actually reach 4.5M bpd operationally. The physical market, not policy announcements, will determine where we go from here.