CNBC reported oil prices rising further on Tuesday after the US formally closed its embassies in Riyadh and Kuwait City, evacuating all staff and suspending consular services. Markets did not treat the closures as a security precaution. They treated them as preparation.
Brent Crude sat at approximately $73 before the first strikes on 28 February. By Monday it had climbed to $85–90, absorbing in sequence the strait of Hormuz traffic collapse — now 80% below normal — the shutdown of Qatar's Ras Laffan LNG terminal, and the strike on Saudi Aramco's Ras Tanura refinery. European gas prices had already surged 45–54% on the Qatar strikes alone. Tuesday's embassy closures layered a diplomatic signal on top of a supply crisis that had already breached every post-1991 record.
When the US evacuates diplomatic staff from allied capitals, the historical precedent — Baghdad before Desert Storm, Tripoli before NATO's 2011 air campaign — is intensification, not de-escalation. The closures followed the IRGC's formal designation of US embassies as military targets and the drone strike that hit the Riyadh compound the previous day. But the market is pricing something beyond embassy security: the withdrawal eliminates the diplomatic infrastructure Gulf states need for back-channel mediation at the moment it matters most.
Three major Protection & Indemnity clubs have issued cancellation notices for War risk coverage across the Persian Gulf and Gulf of Oman. Without P&I insurance, commercial tankers cannot be financed or operated by any major shipping line. Reinstatement requires full syndicated risk reassessment that could take weeks after hostilities cease. The damage to global energy logistics now extends beyond the fighting itself — even a ceasefire would not restore shipping capacity immediately.
