CNBC's Pippa Stevens joins 'The Exchange' to discuss Iran's energy complex and the country's impact on the oil trade.

Tehran

Recent airstrikes against Iran have led to a sharp increase in oil prices, with the energy sector outperforming others. Iran exports about 1.7 million barrels of oil per day, primarily through Karg Island, but the broader concern is the potential disruption of the Strait of Hormuz, a critical passage for global energy trade.

The Strait of Hormuz handles roughly 20% of global oil demand and a significant portion of liquefied natural gas exports, making it vital for countries including Saudi Arabia, the UAE, Kuwait, and Qatar. While no oil supply has been disrupted so far and key infrastructure like Karg Island has not been targeted, market reactions remain cautious due to the region's history of volatility. Analysts note that a closure of the Strait could have major repercussions for global energy prices.

The importance of Iran's energy complex

In the Sea of Red, energy is the only sector on top today, with oil prices moving sharply higher on the heels of Israel's airstrikes against Iran. Crude still about 7%. Pippa Stevens has a closer look at Iran's energy complex and why the Strait of Hormuz, Pippa, is going to be key here. So Kelly, oil's next move really depends here on how Iran responds to the attacks. Now, the country itself is not a major supplier. They export about 1.7 million barrels per day, with more than 90% of those exports coming from Karg Island. That is that small island up there in the north of the Persian Gulf. But the fear is that a wider conflict could disrupt the region's oil supply, including possibly from countries like Saudi Arabia or Iraq. But by far, the biggest possible impact could be an Iranian blockade of the Strait of Hormuz. That is a crucial artery for the global energy trade that's just 21 miles wide at its narrowest point. Now, taking a closer look, as much as 20 million barrels per day pass through the Strait every single day, that's about 20% of global oil and product demand. It handles 34% of the global seaborne oil trade. And about a third of the oil passing through the Strait is actually headed towards China. Now, in addition to Iran, Saudi Arabia, the UAE, and Kuwait all export crude through the Strait as well. Now, it is also key for liquefied natural gas. It's the sole export route for Qatar and the UAE, which together make up about 20% of global LNG supply. Now, at this point, consensus seems to be that this remains a distant tail risk, especially since Iran has never actually closed the waterway. But it's not impossible, with energy firm Kepler saying a closure could push Brent way above $100. Kelly? Pippa, come on over. We're seeing a spate of responses from those who follow the oil and energy stocks much more closely today. How would you summarize the general reaction? Do they think it's a sell the news kind of event or could we see crude spit? Whatever happens at this point, just based on the price action alone, what's the sense that you're getting? Well, I think what we really are seeing is that overnight WTI rallied 14%. Now it's up a meager 7% in comparison. I think what the market's really focusing on here is that no oil supply has actually been disrupted. Traders have been burned so many times in the past few years, whether you look at Russia's invasion of Ukraine when oil went above $130 or even last year's attacks in the Middle East and then nothing actually came off the market. This time around, there's a little bit more of a measured response. I'm not sure you can say 7% is a measured response at this point, but I think that is the key focus point. The fact that Israel did not target something like Carg Island, they clearly were not aiming for that infrastructure. Also, since Iran now exports so much to China, basically 100% of their oil exports, which are so key for the economy, are now going to China, it does kind of change the calculation a little bit. When you look at the regional conflict and whether or not the parties want any type of price spike. Halima mentioned this yesterday as well, but Carg Island is where Iran's crude exports largely go through. Is that right? That's right. So more than 90% of their exports are from Carg Island, which is a very small island in the northern portion of the Persian Gulf. And that has not been targeted. It was targeted before in the 1980s by Iraq when they wanted to get the U.S. involved, but since then it has not been targeted. And the fact that Israel did not choose to target that is notable.

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