Global energy markets are bracing for a prolonged period of volatility as a new wave of hostilities between the US and Iran threatens to disrupt the fragile recovery in commercial vessel traffic through the Strait of Hormuz, RBC Capital Markets strategists said in a weekly note Friday.
RBC analysts said that President Trump's declaration this week that the ceasefire with Iran is over has triggered a swift escalation, with the US launching multiple strikes against military assets and infrastructure in southern Iran.
Iranian forces retaliated, targeting US military infrastructure in Kuwait and Bahrain, intensifying fears that the region is sliding back into a full-scale conflict.
The uncertainty marks a sharp reversal for a region that had shown signs of stabilizing following the June 17 memorandum of understanding.
RBC analysts said that the return to active combat casts significant doubt on the viability of recent diplomatic breakthroughs.
"We do not see their risk aversion fading in the face of another potential 'peace in our time' headline given this cycle of violence," RBC analysts said in a note.
However, the market's primary concern is the security of the Strait of Hormuz, one of the world's most critical oil chokepoints.
The bank said that with Iran reportedly laying mines in the central lane of the corridor, commercial shipping operators are caught in an impossible bind.
Vessels are now forced to choose between the narrow, high-risk Omani lane, where they face potential exposure to live fire, or comply with the Iranian Revolutionary Guard Corps. mandates to access the nominally safer Iranian-controlled waters.
RBC said that the operational fallout has been immediate. Western and Japanese shippers, already wary, are increasingly deterred from the region, with reports indicating a sharp drop in transit volumes since the fighting resumed.
The bank said that daily traffic through the Strait has recently averaged just 34 vessels, a staggering decline compared with the 77 transits recorded on Feb. 28.
The shift is complicating the supply-side math for global refiners, RBC analysts said. Though about 6 million barrels per day of crude have cleared the Strait since the June memorandum of understanding, facilitating a 52-million-barrel drawdown in regional oil-on-water stocks, these flows are now expected to face a hard ceiling.
The bank said that, at a minimum, the latest round of maritime attacks will likely keep a firm ceiling on the number of vessels willing to transit through the Strait of Hormuz.
Compounding the supply outlook is the potential for a resumption of the US naval blockade, a move that would effectively neutralize the most significant benefits Iran gained under the MoU.
Conversely, RBC said that China's recent decision to ease export restrictions on products could provide a bullish counterweight, as refiners there may look to scale up purchases despite mounting logistical hurdles.