Energy Shock: Eight charts that explain the global oil and gas fallout

By Shaz Merwat, RBC Thought Leadership

The Strait of Hormuz is one of the world’s most critical trade arteries—but also one of its weakest links given the frequency of conflicts in the Middle East

• Alternative Middle East export routes have limited capacity of 3.5 to 5.5 million bpd.
• The 54-kilometre waterway handles 20 million barrels per day (bpd) or 20 percent of global oil supply. Only the Strait of Malacca, in Southeast Asia, handles more crude oil.
• Close to 93 percent of Qatar’s LNG exports transit through the Strait—19 percent of global LNG trade.

Strait of Hormuz: The world’s energy highway

Percentage of total energy products passing through the Strait

Energy hungry Asian countries are most exposed to the Middle East crisis

• Japan was the first country to announce the release of oil from its reserves as part of the International Energy Agency-coordinated action, injecting 80 million barrels in the market.
• The U.S. is allowing India to buy Russian oil as a stop-gap measure—as New Delhi scrambles to find alternatives for some of the 2.5-2.7 million bpd it sources from Iraq, UAE, Saudi Arabia and Kuwait.
• The U.S. has exempted Russian oil from sanctions for at least 30 days—weakening Western efforts to support Ukraine in its war against Russia.

Asian markets are most reliant on Middle East oil and gas supplies

Percentage of total energy products passing through the Strait

Crude and natural gas benchmarks have risen as the U.S.-Israel war on Iran spread to the wider region—even impacting North American commodity indices

• LNG Japan/Korea Marker (JKM) jumped the most, underscoring Asian dependence on the Strait.
• The crisis has erased a looming LNG supply glut, with Europe Asia scrambling for supplies.
• Oil prices remain volatile, vacillating between US$76-119 per barrel over the past week.

Oil and gas benchmarks jumped as the Middle East conflict flared up

Selected oil and gas benchmark changes since Feb. 27

Investors are actively reallocating capital to economies less exposed to the conflict, to nations with greater energy security—such as North American markets

• The Korean and Japanese stock market sell-off is reflective of energy exposure but also above-average year-to-date performance pre-crisis.
• China’s estimated 100-day oil import cover has shielded its stock market from a severe downturn.
• U.S. and Canada markets have been structural winners in the reallocation of global equities.

Most equity markets sold off as war broke out—but some are showing signs of resilience

Selected equity market index changes since Feb. 27

American consumers are also paying the price of a conflict thousands of miles away

• While North America’s net exporter of crude oil, the global structure of oil markets has not spared the American economy.
• A recent Washington Post/CNN poll shows about seven in 10 American voters are “very” or “somewhat” concerned that the Iran war will send oil and gasoline prices higher.
• Higher gasoline prices would be a key datapoint for the U.S. administration as it plots it next move.

The U.S.-Israel war on Iran immediately hit American wallets as prices at the pump spikes

Average gasoline prices per gallon, US$

Central banks are suddenly contemplating hikes—not cuts, according to market expectations

• Across Canada, the U.S. and EU, the expectation was an easing of monetary policy as the year progressed—but it has reversed on fears of higher inflation.
• A sustained US$80 oil could raise inflation from 2.2 percent to 2.5 percent in Canada, according to RBC Economics.
• Similarly, the U.S. would see an increase from 2.7 percent to 3.1 percent at US$80 per barrel.

Policy rate expectations in developed economies have changed dramatically in the space of a few weeks

Implied central bank Dec. 2026 policy rate across the select G7 economies

Canadian energy has already been making inroads into the Asian market

• China has been Canada’s biggest non-U.S. oil export destination—which could grow further as relations with Beijing improve.
• South Korea has been the primary destination for Canadian LNG to date.
• Over the long term, Canada could likely serve a more meaningful role in de-risking Asian supply.

Canadian oil and gas are expanding their export base, but remain U.S. centric

Breakdown of Canadian oil (left) and gas (right) exports by country

Brent Future curve suggests oil prices will remain higher for longer

• Around eight million barrels per day of crude and 10 mbd of liquids production in the Middle East is reportedly shut in with the Strait of Hormuz at a virtual standstill, according to the International Energy Agency.
• Despite International Energy Agency members planning 400-million-barrel injection into markets, the price trajectory would likely depend on the U.S.’s ability to ensure the security of the Strait of Hormuz.

Brent crude futures US$ price per barrel pre-conflict and post-conflict

Shaz Merwat is the Energy Policy Lead for RBC Thought Leadership.

This article was originally published on RBC Thought Leadership .

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