Before the temporary ceasefire in the Gulf, the world had been experiencing the biggest oil price shock ever, surpassing even the crises of the 1970s. The scale and speed of movements were comparable to some of the most disruptive episodes in modern energy markets.

At the centre of the disruption was the US-Israel conflict with Iran and the effective closure of the strait of Hormuz. The strait is a choke-point through which roughly one fifth of the global oil supply typically flows. Under the terms of the ceasefire, it is now expected to reopen.

The use of energy as a geopolitical weapon is not new. Sanctions imposed by the US and its allies on countries such as Cuba, Venezuela, Iraq, Russia and Iran have long contributed to oil market volatility. These measures reduce the pool of freely marketable oil and increase uncertainty.

More recently, European, UK and US sanctions on Russia also reshaped trade flows and pricing dynamics. And the G7 has imposed its own price caps on Russian crude.

When it comes to the Gulf, there are alternative export routes out to open sea but their capacity is limited. Saudi Arabia’s east-west pipeline can transport around five million barrels of oil per day to the Red Sea. And the UAE’s pipeline to the city of Fujairah can move around 1.5 million barrels per day, bypassing the strait. Throughout the hostilities, Iran continued to export an estimated 1.5 million barrels of oil per day.

But even accounting for these alternatives, any disruption in the strait implies a loss of roughly 10% of the world’s oil supply. In comparison, the oil shocks........

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