Petrobras Watches Iran Conflict Before Deciding on Fuel Prices

• The Strait of Hormuz, through which 20% of global oil flows, faces potential closure after vessels stopped moving and were targeted during the conflict escalation
• Petrobras must balance multiple factors including oil prices, exchange rates, and potential capital flight from the U.S. that could strengthen Brazil's currency and offset higher crude costs
• The company maintains alternative supply routes outside the conflict zone and imports most crude from regions outside the Middle East crisis area, preserving operational flexibility

Summary: Petrobras Monitors Iran Conflict Impact on Fuel Pricing

Brazilian state-run oil company Petrobras is closely monitoring escalating tensions in Iran before making fuel pricing decisions, according to four sources familiar with the matter. The company plans to observe oil price movements over the coming week following Monday's surge in global crude prices.

Key Market Developments:

• Brent crude jumped as much as 13% on Monday, trading up approximately 8% by noon Brasilia time
• Price surge followed Iran's retaliatory attacks disrupting shipping through the Strait of Hormuz
• The conflict escalated after weekend strikes by Israel and the U.S. killed Iran's Supreme Leader Ali Khamenei

Critical Factors for Petrobras:

The company is evaluating three primary concerns:

1. Oil price volatility and exchange rate impacts on its pricing formula
2. Production disruptions at oil and fuel facilities and logistical bottlenecks
3. Strait of Hormuz closure risk – 20% of global oil flows through this waterway, which experienced vessel targeting over the weekend

Strategic Implications:

Petrobras could face mixed effects from a prolonged conflict. While higher oil prices may benefit the producer, the company imports daily crude volumes for blending and may need to purchase more expensive crude from alternative sources. However, potential capital flight from the U.S. could strengthen the Brazilian real, partially offsetting higher oil costs.

Executive Director Claudio Schlosser assured the company has "alternative routes outside the conflict zone" and flexibility to maintain competitive operations. Most Petrobras imports originate outside the crisis region and can be redirected if necessary, though the company declined to comment on specific pricing changes.