Oil prices plummeted 7% on Tuesday (March 10) after soaring to a more than three-year high in the previous session as U.S. President Donald Trump predicted the war in the Middle East could end soon, easing concerns about prolonged disruptions to oil supplies.

Brent futures were down $6.75, or 6.8%, to $92.21 a barrel at 1012 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 was down $6.41, or 6.8%, to $88.36 a barrel. Both contracts fell as much as 11% earlier.

Volumes in Brent dropped to about 213,000 contracts, the lowest amount since February 27, just before the start of the conflict. Volumes in WTI fell to 212,000, the lowest since February 20.

WHAT IS AT STAKE?

The Strait of Hormuz, a narrow passage of water between Iran and Oman that links the Gulf with the Gulf of Oman, is the only sea exit for oil- and gas-producing countries such as Kuwait, Iran, Iraq, Qatar and the United Arab Emirates.

Oil prices briefly climbed to their highest level since 2022 on Monday. High oil prices could trigger another cost-of-living crisis, as happened after Russia's invasion of Ukraine in 2022, according to the United Nations.

A prolonged conflict could also cause a fertilizer shock, risking global food security. About 33% of the world’s fertilisers, including sulphur and ammonia, pass through the Strait, according to analytics firm Kpler.

An extended war could fuel fears of a global economic crisis similar to those that followed the Middle East oil shocks of the 1970s.

PRODUCTION SHUTDOWNS

- Saudi Arabia has cut oil production only marginally so far to around 9.8 million bpd from its OPEC quota of 10.1 million bpd, according to Energy Aspects estimates. In February, it produced around 10.9 million bpd to boost exports in preparation for possible supply disruptions.

Aramco has begun cutting output at two of its oilfields, two sources said on Monday. Saudi Arabia produced around 10.3 million barrels per day of crude oil in February.

Last week, Saudi Arabia suspended output at its 550,000-bpd Ras Tanura refinery and began rerouting crude loadings from eastern ports to Yanbu on the Red Sea. The refinery was struck again on March 4.

- Overall, Middle East crude output has fallen by about 4.9 million barrels per day (bpd) since the start of the hostilities, including cuts of 2.4 million bpd in Iraq, 0.7 million bpd in Kuwait, and 0.6 million bpd in the UAE, according to Energy Aspects.

- UAE drone attack: Abu Dhabi state oil giant ADNOC has shut its 922,000 barrels of oil per day Ruwais refinery following a drone strike that caused a fire, a source with knowledge of the situation said on Tuesday. A fire also broke out at the UAE's Fujairah port, a key global oil storage and bunkering hub.

- Kuwait force majeure: Kuwait Petroleum Corporation began cutting oil output and declared force majeure on March 7.

- Iraq: Oil production from Iraq's main southern oilfields has fallen by 70% to just 1.3 million barrels per day from 4.3 million, sources said on March 8.

On top of that, in Iraqi Kurdistan several companies have stopped output. The region exported 200,000 bpd by pipeline to Turkey in February.

- QatarEnergy LNG halted: Qatar stopped operations at its LNG facilities on March 2, affecting some of the world's largest plants and a source that supplies about 20% of global LNG. QatarEnergy also suspended parts of downstream output a day later. It declared force majeure on LNG shipments on March 4.

- Bahrain: Bapco Energies on Monday declared force majeure on its group operations following an attack on its 380,000 barrels per day (bpd) Sitra refinery, which mainly buys Saudi crude.

- Israel also curtailed parts of its oil and gas production.

- In Iran, Israeli strikes have hit multiple fuel depots and Kharg Island, Iran's main oil export outlet, although the extent of damage wasn't clear.

SHIPPING

- Strait of Hormuz: traffic through the Strait was largely closed for a 11th day. Some 11 ships came under attack and a very limited number of tankers managed to sail in and out of the Strait.

Iran declared the Strait closed on March 2 and warned that Iran would fire on any ship attempting to pass.

- War risk insurance cancelled: Major marine insurers are cancelling war-risk coverage for vessels operating in Iranian, Gulf and adjacent waters.

- U.S. offers assurances: President Donald Trump said the U.S. Navy could escort tankers through the Strait and directed the U.S. International Development Finance Corporation to provide political‑risk insurance and financial guarantees for Gulf shipping, though shipowners and analysts doubt this will be enough.

IMPACT ON CONSUMERS

- Numerous Asian refineries and petrochemical companies have cut runs or declared force majeure as the war disrupts supplies of feedstocks including naphtha, used for steam crackers.

- South Korea will cap domestic fuel prices to contain price spikes and discourage panic buying.

- Vietnam plans to remove import tariffs on fuels until the end of April to ensure sufficient supply.

- Bangladesh will close all public and private universities from Monday and bring forward Eid al-Fitr holidays to conserve electricity.