Iran Fires on the One Port Designed to Bypass the Strait of Hormuz, and Oil Markets Are Already Reacting

There is a reason Fujairah matters more than most people realise. Tucked along the UAE's eastern coastline on the Gulf of Oman, the port sits just outside the mouth of the Strait of Hormuz, which means tankers can load and sail without ever entering the waterway Iran has now effectively declared shut. That bypass geography is precisely what made it a target on Tuesday.

A fire broke out inside the Fujairah Oil Industry Zone after debris from an intercepted drone fell within the facility, Fujairah's government media office confirmed, adding that no injuries were reported and that the blaze had been brought under control. Traders and suppliers said that storage facilities at the port had been struck. Storage operators, including Vopak, VTTI, MENA and GPS, had already suspended operations and restricted staff access before Tuesday's attack. The suspensions were already in place, and the drones came anyway.

The Strait Is Already Closed

To understand why Tuesday's strike unsettled markets as sharply as it did, it helps to know what the Strait of Hormuz actually means to global supply. Roughly a fifth of all the oil consumed worldwide moves through that 21-mile-wide channel daily, and it also carries about 20% of global LNG exports, primarily bound for Asia.

Since Iran launched its retaliatory campaign following the joint US-Israeli strikes that killed Supreme Leader Ayatollah Ali Khamenei on 28 February, that corridor has essentially stopped moving. A commander in Iran's Revolutionary Guard Corps (IRGC) declared the strait closed and warned that no ship is allowed to pass. Danish shipping giant Maersk suspended all crossings. War-risk insurers followed, withdrawing coverage from the region. At least five tankers have been struck in Gulf waters since the conflict began, with about 150 ships stranded around the strait.

Fujairah was the workaround. Now it, too, has been hit.

Prices Are Already Moving

Brent crude futures rose $6.39, or 8 per cent, to $84.13 a barrel on Tuesday — their highest since July 2024. US West Texas Intermediate gained 7 per cent, hitting levels not seen since June. European natural gas futures have surged more than 40 per cent since the conflict began. Benchmark Asian LNG prices jumped almost 39 per cent after QatarEnergy suspended production at Ras Laffan and Mesaieed Industrial City following Iranian drone strikes on its facilities.

For drivers, the impact is being felt quickly. Wholesale petrol prices in the US reportedly jumped 25 cents a gallon in a single morning as suppliers moved to get ahead of what is coming. 'Yesterday, I got a call early in the morning, and there were several companies that were raising their wholesale prices for gasoline by 25 cents,' energy analyst Tom Kloza said. 'Clearly, there's a whiff of panic there.'

Bank of America analysts have said a prolonged Hormuz disruption could push Brent crude $40 (approximately £30) to $80 (approximately £60) above pre-conflict levels. Deutsche Bank's Michael Hsueh warned that a full Iranian naval blockade—with mines and anti-ship missiles—could drive the benchmark toward $200 (approximately £150) per barrel. JPMorgan analysts put Brent at $120 (approximately £90) per barrel if the conflict stretches past three weeks and Gulf storage capacity becomes exhausted.

Nothing Like It Before

'We have not seen anything like this in pretty much the history of the Strait of Hormuz,' Claudio Galimberti, chief economist at Rystad Energy, said. He compared it to blocking the aorta. That analogy is not overstated — QatarEnergy has halted LNG production, Saudi Aramco's 550,000-barrel-per-day Ras Tanura refinery was shut down after drone debris struck it, and companies including DNO, Gulf Keystone Petroleum and HKN Energy have stopped output across Iraqi Kurdistan as a precaution, with the region exporting around 200,000 barrels per day via pipeline to Turkey before the shutdowns.

ING analysts warned in a note that 'a greater risk to the market would be Iran targeting additional energy infrastructure in the region,' adding that further strikes 'could lead to more prolonged outages.' Tuesday's attack on Fujairah suggests Iran is doing exactly that. Not just blocking the strait, but methodically closing off every viable alternative route.

Fujairah is the third-largest oil and products storage hub in the world. It stores roughly 70 million barrels of hydrocarbons and serves as the main bunkering port for ships that transit the Hormuz region. Striking it does not just rattle markets psychologically. It removes the last significant buffer between a strait under siege and the rest of the world's energy supply, and with no clear diplomatic off-ramp in sight, the pressure on fuel prices—at forecourts, on energy bills, at supermarket checkouts—is unlikely to ease any time soon.