Trump ‘doesn’t care’ but he is leading the world into a nightmare

There are two scenarios for oil prices as the conflict in the Middle East drags on. One is relatively benign. The other is ugly.

Sharemarket investors, distracted by the frenzy around artificial intelligence and the queue of mega initial public offerings, are optimistic. They’ve largely ignored the war and the oscillating state of negotiations to end it.

Some oil industry experts, however, aren’t as sanguine, with key figures predicting that it could be well into next year before oil flows normalise – even if there were an imminent peace deal and the Strait of Hormuz opened within weeks. In the meantime, they say, oil prices could hit $US150 a barrel, if not more.

The longer the war drags on, the more likely it is that the more pessimistic views will prevail.

Last week, the heads of the International Energy Agency, the International Monetary Fund, the World Bank and the World Trade Organisation said global oil inventories were being drawn down at a record pace, presenting a significant threat to the global economy.

If shipping flows didn’t return to normal, depletion of global oil inventories ahead of the peak summer demand in the northern hemisphere would present increasing risks for fuel security, market conditions and economic resilience, they said.

Sultan Al Jaber, the chief executive of the United Arab Emirates’ state oil company, ADNOC, said last week that oil flows through the Strait of Hormuz wouldn’t return to normal before the first or second quarter of next year even if the conflict ended now. It would take at least four months to get back to 80 per cent of pre-war flows, he said.

Another ADNOC executive, its vice president for sales and trading Philippe Khoury, said it could take a year for global oil supply chains to recover after flows normalised.

To date, the global oil market has lost something close to 1.2 billion barrels of oil because of the near-total closure of a strait through which about 20 million barrels a day of oil and oil products (about 15 million barrels a day of it oil) used to flow.

That’s been partly offset by increased flows through pipelines in Saudi Arabia and the UAE that bypass the gulf, increased production from the US, Russia and elsewhere, the release of about 400 million barrels of oil from national strategic stockpiles and the drawdown of the record level of oil that was at sea before the US Israeli attacks – a function of a pre-war surplus of supply over demand as well as circumvention of the sanctions on Russian and Iranian oil.

With only a trickle of oil making its way through the strait, limited sp