The market should have focused much more on the implications of a possible UAE exit from OPEC because the UAE is a heavyweight producer with deep international oil company involvement. Instead, markets were quickly overwhelmed by new geopolitical shocks, including Iran’s attack near Fujairah. The oil industry today feels like “a boxer in the ring” taking repeated punches. Many projects are being delayed as companies wait for clarity, while upcoming geopolitical events like a possible Trump-Xi meeting and the G7 summit continue influencing market sentiment.
UAE-China Relations and Rising Security Risks
The UAE and China have always maintained strong relations, and those ties could deepen further in the future, particularly through upstream investment and energy cooperation. However, in the short term, security risks dominate. Fujairah is strategically critical because it offers one of the few ways to bypass Hormuz, which is why it has become vulnerable. The recent event shows the IRGC is now effectively running Iran, creating a far more unpredictable environment where diplomacy is increasingly ineffective and regional energy flows remain under constant threat.
Hormuz is “Mostly Off” for Global Shipping
The Strait of Hormuz today is not truly “on and off” but “mostly off” for independent shipping. While some state-backed vessels may still move under protection, the broader environment has become highly unpredictable. Unlike the Suez Canal blockage, the danger in Hormuz comes from decentralized actors linked to the IRGC who can independently escalate attacks. This creates severe uncertainty for shipping markets because incidents may happen without direct political control. Until there is either peace or major political change in Iran, black swan risks will remain elevated.