Shell CEO warns of 'huge impact' on trade if Strait of Hormuz blocked

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By Stephen Stapczynski and Shery Ahn

 

Shell Plc, one of the biggest traders of oil and natural gas, has contingency plans in case the conflict between Israel and Iran disrupts flows from the region, warning that a potential blockage of the Strait of Hormuz could deliver a substantial shock. 

“If that artery is blocked, for whatever reason, it has a huge impact on global trade,” Chief Executive Officer Wael Sawan said at the Japan Energy Summit & Exhibition in Tokyo. “We have plans in the eventuality that things deteriorate.” 

The global energy market has been transfixed by the conflict between Israel and Iran, including the possibility the US may decide to join the assault. So far, while crude has spiked due to the tensions, there’s been no major interruption to flows of energy, although traders are on high alert for the possibility. 

 

About a quarter of the world’s oil trade passes through the Strait of Hormuz, which links the Persian Gulf to the Indian Ocean. In the past, Iran has targeted ships traversing the chokepoint, and has threatened to block the waterway. In recent days, ships’ signals have been jammed.

 

“What is particularly challenging right now is some of the jamming that’s happening,” said Sawan, referring to the interference in navigation signals in and around the Persian Gulf. Shell is “being very careful” with shipping in the Middle East due to the conflict, he said.

 

In recent days, Qatar asked tankers to wait outside the strait until they’re ready to load, while Japanese shipper Nippon Yusen KK instructed its vessels to maintain a safe distance from the shore while navigating Iranian waters.