According to a recent analysis by CGS International Securities (Thailand) (CGSI), escalating conflict involving the U.S. and Israel’s actions against Iran is heightening oil market risk. The uncertainty is driving up the oil risk premium and could have significant, immediate implications for supply chains and refining margins—especially for businesses with strong exposure to Middle Eastern crude.
CGSI notes that a limited, short-term disruption from the conflict may see the oil risk premium recede quickly, bringing price relief. However, should hostilities persist, oil prices could face continued or intensified pressure, particularly if Iranian exports are disrupted or key infrastructure such as Kharg Island is damaged. One of the critical threats highlighted is a potential closure of the Strait of Hormuz, a global shipping chokepoint accounting for roughly 21% of world seaborne oil trade.
For refiners, there is an expectation of robust refining margins (GRM), given the risk that Iran’s oil refineries—representing 2% of global and 26% of Middle Eastern refining capacity—may be targeted. Additional supply concerns stem from a possible halt in diesel and jet fuel exports through the Strait of Hormuz, which collectively account for around 10% and 20% of worldwide marine-traded diesel and jet fuel, respectively. This scenario could benefit Thai refiners in the short term.
Nevertheless, stronger crude oil premiums for light blends, along with higher shipping costs tied to geopolitical uncertainty, could offset these positives. Should the Strait of Hormuz be blocked, the expectation is that a prolonged closure is unlikely, as both the U.S. and Gulf states have incentives to restore transit quickly. Shipping costs are likely to remain elevated, however, with charterers possibly seeking higher war risk insurance premiums.
Rising oil prices often push up the costs of feedstocks like naphtha and LPG, particularly as the LPG market has tightened since Saudi Arabia’s late-February export suspension. Data from Kpler indicates that about 26% of natural gas liquids (ethane, propane, butane) pass through the Strait, while 40% of Middle Eastern naphtha exports are bound for Asia in the first half of 2025.
CGSI suggests upstream E&P companies and refiners stand to benefit from stronger oil prices, while petrochemical producers may face squeezed margins due to rising feedstock costs. The brokerage maintains a positive view on PTT and PTTEP, given their estimated 5-6% dividend yields in 2026.
Thai refiners will be supported by strong middle distillate, naphtha, and LPG crack spreads and inventory gains. However, should a supply disruption extend beyond a month, refiners may have to scale back crude distillation unit operations as inventories dwindle.
Current shipping activity through the Strait of Hormuz dropped by 80% on March 3, according to Al Jazeera, as maritime operators diverted routes amid security concerns, despite no formal closure. Saudi Aramco advised Asian buyers to switch to oil from the Red Sea’s Yanbu port, as Bloomberg reported.
Meanwhile, Argus Media reported a drone strike linked to Iran on the UAE’s Fujairah Oil Terminal—an important bypass for Hormuz—causing a fire in a storage area on March 3.
CGSI highlights the elevated oil supply risk for Thai refiners, referencing Department of Energy Business data showing that, in 2025, refineries such as TOP, SPRC, and IRPC sourced 91%, 85%, and 70% of their crude imports, respectively, from the Middle East. In contrast, BCP’s Sriracha refinery (81% owned by BCP) and PTTGC primarily use crude from West Africa, the U.S., East Asia, and domestically.
On average, Thai refiners hold crude stocks sufficient for about 30 days of production, or up to 45 days including inbound shipments, assuming steady processing rates. The threat for refiners increases if tanker movements from the Middle East are blocked by rising regional tensions, which could force reductions or halts in refinery output due to supply shortages.
The analyst noted that TOP and IRPC are viewed as more vulnerable to supply risk than SPRC, as their non-Murban UAE crude grades still require transit through the Strait of Hormuz. Arab Light and Arab Extra Light cargoes may not be easily rerouted to Yanbu, limiting contingency options.
BCP and PTTGC, while less dependent on Middle Eastern crude, now face rising premiums on alternative grades due to heightened competition across Asian refineries. CGSI also calls attention to the risk of elevated shipping rates, which could erode refinery margins.
Against this backdrop, upstream players such as PTTEP are safer investment picks than downstream refiners. The firm maintains sector weighting on Thai energy and refining equities, viewing geopolitical risks as potentially balanced by demand trends, though cautioning that weaker oil consumption could create downside risks.
