Since U.S. and Israeli airstrikes on Iran began on February 28, the world’s oil supply has faced its biggest disruption in history. The Strait of Hormuz, which normally handles about 20% of the world’s oil shipments, has been blocked since the strikes began. Flows through the waterway dropped from approximately 16 million barrels per day to 1-1.8 million barrels per day, with only Iranian exports continuing at reduced levels.
The disruptions have cut global supply by roughly 11 million barrels per day. Production has largely come to a standstill in key OPEC+ member countries, including Saudi Arabia, the UAE, Kuwait, Qatar, Iraq, and Bahrain. More than 3 million barrels per day of refining capacity has shut down across the region, compounding the supply crunch.
Brent crude oil prices reportedly hit $119.50 per barrel, the highest since mid-2022. This represents a dramatic departure from pre-crisis projections, which had forecast Brent oil prices averaging between US$70 and US$75 per barrel in 2025.
The International Energy Agency agreed on March 11 to release a record 400 million barrels from strategic stockpiles. Non-OPEC+ countries like Kazakhstan and Russia have helped offset some of the losses. Saudi Arabia and the UAE have also been using alternate shipping routes to bypass the blocked strait. Even so, storage facilities are filling up fast because bypass capacity is limited.
The outlook’s uncertain. A full restart of shut-in production could take weeks or months. There’s also a risk that Houthi forces could block the Bab al-Mandab Strait, cutting off oil shipments to Europe. IEA Executive Director Fatih Birol described energy markets as being in an “extremely critical period” as the crisis continues to unfold. Birol also warned that no country will be immune if the crisis continues, underscoring the global reach of the disruption.
References
- https://www.investing.com/news/commodities-news/world-faces-largestever-oil-supply-disruption-on-middle-east-wariea-says-4556258
- https://thenewregion.com/posts/4924/iea-chief-warns-11-million-oil-barrels-a-day-lost-in-middle-east-war
- https://www.aa.com.tr/en/energy/oil/middle-east-tensions-threaten-biggest-oil-supply-disruption-in-history-iea-says/55449
- https://www.ainvest.com/news/middle-east-conflict-creates-oil-supply-squeeze-anchor-prices-100-months-2604/
- https://www.youtube.com/watch?v=6eraJjzsAVE
