Global oil markets are grappling with an unprecedented supply crisis as nearly half of the world's crude now originates from conflict-affected regions, six months after the U.S. and Israeli attacks on Iran triggered widespread disruptions. This escalating instability, particularly impacting the Strait of Hormuz, has forced Gulf exporters to adopt clandestine shipping methods and reroute supplies, fundamentally altering global energy flows and driving up prices.
The ongoing 'Iran war,' coupled with the Russia-Ukraine conflict and other regional strains, has created the largest oil supply crisis in history, with an estimated 5-7 million barrels per day (bpd) currently disrupted from the Gulf alone. This sustained pressure on supply, alongside reduced global refining capacity, underscores a critical vulnerability in the international energy system, demanding urgent strategic adjustments from producers, refiners, and policymakers alike.
Executive Summary
The global oil market is experiencing its most severe supply crisis to date, with approximately 43% of the world's crude, or about 45 million barrels per day (bpd) based on 2025 output, now originating from countries embroiled in conflict. This unprecedented disruption stems primarily from the six-month-old 'Iran war,' initiated by U.S. and Israeli attacks, which has severely curtailed flows through the Strait of Hormuz, a vital chokepoint for a fifth of global oil consumption. Gulf producers, including Saudi Arabia, are resorting to rerouting exports via the Red Sea or employing covert shipping tactics to circumvent blockades, while global refining capacity has also seen a significant reduction.
What Happened
Six months ago, U.S. and Israeli attacks on Iran initiated a conflict that has profoundly impacted global oil supply. This 'Iran war' has effectively stalled maritime traffic through the Strait of Hormuz, leading to substantial production shut-ins and attacks on energy infrastructure across the Gulf. Concurrently, the Russia-Ukraine war has further exacerbated supply strains, forcing production and refining cuts in regions like Kazakhstan.
Key Developments
- Historic Disruption: Nearly half of global oil supply (43% or 45 million bpd) now comes from conflict zones, marking the largest supply crisis on record.
- Strait of Hormuz Impact: The Iran war has severely disrupted flows through the Strait of Hormuz, a critical chokepoint for 20% of global oil consumption.
- Gulf Export Adaptations: Saudi Arabia is rerouting oil to the Red Sea, while other Gulf exporters are using clandestine methods to move crude out of the Strait of Hormuz.
Regional Context
The ongoing 'Iran war' has fundamentally reshaped Middle Eastern energy geopolitics, forcing Gulf nations to navigate heightened security risks and adapt export strategies. This regional instability, coupled with the broader Russia-Ukraine conflict, has amplified global reliance on alternative supply sources, particularly from the U.S.
Market Impact
For traders, refiners, and analysts, the sustained disruption of 5-7 million bpd from the Gulf presents significant challenges, driving up crude prices and tightening global fuel markets. The reduction in global refining capacity by approximately a tenth further exacerbates supply concerns, leading to elevated fuel prices that contribute to inflation and higher borrowing costs worldwide.
Outlook
The market is expected to remain in deficit in the near term, with risks to total flows remaining high due to continued attacks in the Red Sea and near the Suez Canal. The duration of Strait of Hormuz disruptions will be a critical factor determining future supply stability and price trajectories.
