Gulf national oil companies unfazed: Gulf national oil companies are unlikely to declare force majeure pre-emptively amid elevated geopolitical risks in the Middle East, following the reported sea traffic disruptions in the Strait of Hormuz, said SPI Asset Management managing partner Stephen Innes today. He emphasized that such a move would typically require demonstrable inability to perform contractual obligations, and Gulf national oil companies would more likely manage nominations as well as adjust logistics first, stressing that disruptions in the Strait of Hormuz would not automatically trigger force majeure. According to BERNAMA News Agency, force majeure in the oil and gas industry is a contractual provision that relieves parties from performing obligations, such as supply or exploration, due to unforeseeable and uncontrollable events, including natural disasters, wars, pandemics, or government actions that make performance impossible. It requires a specific clause, timely notice, and strict complianc e and does not extend to mere economic hardship or market downturns. Innes pointed out that the market is currently pricing transit risk rather than confirmed production loss. He explained that if export routes are materially impaired, even with upstream production intact, this constitutes a strong legal basis for a declaration. However, if flows continue, volatility will moderate, but if transit is disrupted, the repricing will be rapid and nonlinear because the strait represents systemic, not marginal, risk. Oil tanker traffic through the Strait of Hormuz has slowed significantly following US and Israeli strikes on Iran, with news reports describing the key shipping lane as effectively closed. Around a fifth of global oil and liquefied natural gas transits the strait each day, worth over US$1.3 billion, including Iranian exports. Innes also mentioned that even if the Strait of Hormuz remained technically open, war-risk premiums, higher freight rates, and potential insurance withdrawals could effectively constrain flows. He noted that in previous episodes, insurance economics tightened before physical infrastructure was damaged, with the industry often concerned about insurability and commercial viability as much as direct physical risk. Regarding exposure to Iranian crude disruption, Innes said China's independent refiners were most directly exposed, as they absorb the majority of Iranian exports, often through indirect trading channels. He mentioned that a disruption would first tighten feedstock availability for that segment. At the same time, the broader Asian market would feel the impact through higher benchmark pricing rather than immediate physical shortages. When asked about alternatives, Innes said Saudi Arabia's East-West pipeline and the United Arab Emirates' Fujairah export route provide partial bypass capacity but can only offset a fraction of total strait volumes, which account for about 20 percent of globally traded oil movements. He concluded that while these routes reduce the severity of a disruption, they cannot eliminate the systemic impact if transit is materially impaired. At the point of writing, Brent crude rose 2.87 percent to US$72.87 per barrel.