Skyrocketing oil prices get another boost! The world's largest oil exporter, Saudi Arabia, follows suit in cutting production as global energy supply faces a critical shortage.

Media reports cited sources revealing that as the strategically important Strait of Hormuz is essentially blocked by the Iranian military, and countries like Saudi Arabia and other Middle Eastern oil producers are tending to completely fill their oil storage tanks, Saudi Arabia, the largest oil-producing country in the Middle East, has begun to cut its overall oil production, including crude oil. This largest oil-exporting country in the world has taken this measure following the UAE, Kuwait, and Iraq. After the Iranian military issued a major threat to the global shipping system, a new round of Middle East wars has almost completely closed the narrow waterway connecting the Persian Gulf to the open seathe critical global maritime energy hub of the Strait of Hormuz. This blockade of energy exports from major oil-producing countries around the world is driving up international oil benchmark pricesBrent crude futures prices have risen significantly, and the new round of inflation caused by rising oil and gas prices is likely to have a significant macroeconomic impact on the global economy similar to "stagflation." Saudi Aramco, one of the world's largest state-owned energy giants based in Saudi Arabia, declined to comment. The latest statistics show that Saudi Arabia, the world's largest oil-exporting country, produces around 10 million barrels of oil per day and exports around 7 million barrels per day, far exceeding major oil-producing countries like Russia and the United States. While the United States has become the world's largest oil producer, net exports are still lower than Saudi Arabia due to massive domestic consumption. Although Russia is the second-largest exporter, its export stability is limited due to geopolitical factors and sanctions. Saudi Aramco, controlled by the Saudi government, has redirected some of its oil and gas shipments from the usual route through the Strait of Hormuz to the Yanbu oil and gas export area in the Red Sea. However, the pipelines that carry these export volumes do not have sufficient capacity to fully replace the huge energy export volume system that relies on the Strait of Hormuz. Antoine Halff, co-founder and chief analyst of the geospatial analysis company Kayrros, stated that theoretically, the Arab producers around the Persian Gulfincluding Saudi Arabia, the UAE, Kuwait, and Iraqhave only a little over 100 million barrels of stored energy, accounting for about a third of their total stored energy. However, he said in a LinkedIn post last week that the actual effective level would be lower, and in any case, the operational usage of storage tanks rarely exceeds 80% of actual levels. As shown in the above figure, a massive interruption in Middle East energy transportationthe region's hostile action has disrupted oil and gas production as well as large oil tanker shipments. The Strait of Hormuz accounts for approximately 20%-30% of global core energy transportation, including crude oil and natural gas. As of the time of writing, the international crude oil pricing benchmark, Brent crude futures prices, have surged by more than 13%, remaining above the important $100 per barrel level, having risen as high as 30% earlier, primarily due to the complete interruption of oil and gas transportation through the Strait of Hormuz, leading to production cuts in major oil-producing countries in the Middle East. The early rise in oil prices marks the largest single-day increase since April 2020 and reflects the highest oil price levels since June 2022, continuing the 27% increase from last week. Oil prices briefly skyrocketed to near $120 per barrel on Monday, up nearly 80% since the outbreak of the Iran war, and the market interpreted it as a "stagflation" shock of "higher inflation + more pessimistic economy." A recent report released by Wall Street financial giant JPMorgan Chase shows that the Middle East geopolitical conflict erupted only seven days ago, but the supply interruptions in the Persian Gulf oil-producing countries have accelerated beyond expectations. "The current actual production cut is around 2 million barrels per day, but driven by the dual pressures of tanks trending toward saturation and a severe shortage of oil tankers, the regional production cut scale will exceed 4 million barrels per day by Friday (March 13)," the JPMorgan Chase commodities analyst team said. The report indicates that this figure means that global oil supply will lose more than double Iraq's national export volume within just two weeks. Market expectations for the global economy heading towards "stagflation" have been further accelerated after US President Trump's recent statement that some areas of Iran have not been targeted by US and Israeli military airstrikes, and that a $100 oil price is a "very small price to pay" for "security and peace." This has shattered previous optimistic hopes that this round of conflict would be relatively controlled. Just a few days ago, investors were trading "stagflation" with tentative sentiment, but now the trend has become more pronounced: investors are pricing in a deeper, longer-lasting oil supply shockthis shock could squeeze global economic growth, reignite inflation indicators, push up government bond market yields, and drive the so-called "stagflation" trading theme; on the stock market side, since the escalation of Middle East geopolitical tensions due to the US and Iran conflicts, this round of selling has wiped out about $6 trillion in global stock market value.