Iran War Shakes Global Energy Markets

In recent days, the crisis involving Iran, the United States, and Israel has rapidly reshaped the geopolitical landscape of the Middle East. On Saturday, 28 February, a joint U.S.–Israeli strike hit Iranian military targets, killing Supreme Leader Ali Hosseini Khamenei. Tehran’s responded promptly: missile and drone attacks targeted several Gulf states and key energy infrastructure across the region, ushering in a new phase of heightened tensions.

Beyond its political and military implications, the crisis is already having tangible effects on global energy markets. The first and most immediate signal comes from the oil market. In a region that accounts for a significant share of global crude production, any military escalation stokes fears of potential supply disruptions and drives prices higher. In the hours following the attacks, Brent crude rose by more than 1%, briefly approaching $83 per barrel, while several analysts say a return to the $100 mark cannot be ruled out.

To understand why events in Iran can have such an immediate impact on energy markets, it is necessary to consider the country’s role in the global oil system. Iran produces around 3.3 million barrels of oil per day, making it the fourth-largest producer within OPEC. The country also holds some of the world’s largest oil reserves and a significant share of global natural gas reserves. Much of Tehran’s oil exports are destined for Asian markets, particularly China, which absorbs roughly 90% of Iranian exports. Despite these figures, Iranian production accounts for only 3–4% of global oil supply. At first glance, this may seem relatively minor. Yet, any escalation involving Tehran tends to trigger strong reactions in energy markets. The reason lies not only in Iran’s production itself, but in two key factors. On the one hand, the country’s geographic position allows it to influence traffic through the Strait of Hormuz, one of the world’s most sensitive energy trade chokepoints. On the other hand, Iran has the capability to directly target energy infrastructure in the region—such as refineries, production facilities, or export terminals—posing a risk of temporarily reducing global energy supply.

The first key element is the Strait of Hormuz. This narrow maritime corridor, linking the Persian Gulf to the Gulf of Oman and the Arabian Sea, is one of the main arteries of global energy trade. Around one-fifth of the world’s oil passes through this chokepoint, along with large volumes of liquefied natural gas, particularly from Qatar. Tehran controls its northern shore—a position that has, over time, turned Hormuz into a powerful instrument of geopolitical leverage. Iran has repeatedly threatened to disrupt traffic through the strait, but until now had never actually blocked the passage of oil tankers. The current situation appears different. In recent days, several energy companies and shipping operators have suspended transit through the area after a number of tankers were hit by missile and drone attacks. Commercial traffic has come to a near standstill, making oil transport far more complex and costly.

The second element concerns direct attacks on the region’s energy infrastructure. In recent days, Iran has targeted several facilities linked to energy production and refining across the Gulf. In Saudi Arabia, the state-owned oil company Aramco has shut down its largest domestic refinery following a drone attack. At the same time, QatarEnergy has suspended part of its liquefied natural gas production, with immediate effects on global gas prices. When infrastructure of this kind is targeted—even temporarily—the resulting reduction in supply tends to quickly drive prices higher.

Against this backdrop, governments and energy operators are seeking ways to reduce the vulnerability of energy supplies tied to the Persian Gulf. The crisis has underscored how the global oil market remains exposed to geopolitical shocks in a region that accounts for a significant share of global supply.

A first strategy is to find alternative transport routes to the Strait of Hormuz. In recent years, Saudi Arabia and the United Arab Emirates have invested in overland pipelines capable of bypassing the strait. The main Saudi pipeline links the Gulf’s oil fields to the Red Sea, while the UAE operates a pipeline that carries crude to the Indian Ocean. However, these infrastructures have limited capacity, estimated at around 2.6 million barrels per day—significantly below the volumes typically transported by sea.

A second approach is to seek alternative suppliers. More recently, several countries—particularly within the European Union—have adopted policies aimed at diversifying energy sources in order to reduce dependence on the Middle East. Some Asian economies are also exploring new oil suppliers to offset potential disruptions in shipments from the Gulf.

Finally, a third strategy involves OPEC+. The group of major oil-producing countries has already announced a production increase scheduled for April, aimed at bringing more barrels to market and containing price volatility. In the event of further escalation, the organization could be called upon to boost global output to offset potential supply disruptions.

Over the coming weeks, the conflict’s evolution will be crucial in shaping energy markets. Much will depend on the actions and counteractions of the United States, Israel, and Iran, as well as on the ability of other producers to offset potential supply disruptions. Precise forecasting remains difficult: the situation is highly fluid, and any new military development can quickly be reflected in oil prices. In this context, the crisis once again underscores how deeply energy markets are intertwined with geopolitics.

Translated by Iuliana Cindrea

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