Global Oil Supply Strained Six Months Into Iran Conflict

Almost half of the world's oil now comes from countries affected by conflict, according to Reuters calculations. This trend is driven by a six month war between Iran and the US and Israel, which began in February following US and Israeli strikes on Iran. The conflict has caused the largest oil supply crisis on record, with current Gulf oil disruptions estimated between 5 million and 7 million barrels per day. In Iran, citizens are queuing for petrol as officials warn that war and inflation are triggering fuel shortages, while a US blockade continues to bite.

The Strait of Hormuz, a vital conduit for oil and gas, remains largely paralyzed. Commodity carrier traffic plummeted from a daily average of 95 transits in February to as few as 10 per day after Iran blocked the strait on March 1. While a June agreement briefly increased traffic to 36 transits per day, numbers dropped back to an average of 15 following the collapse of peace talks on July 8. Since the ceasefire failed, two thirds of transits have become dark, meaning their exact routes cannot be confirmed due to disabled transponders or jammed signals.

The International Maritime Organization reported that 68 incidents have occurred in the Gulf and neighboring waters over the last six months. These incidents have resulted in at least 20 deaths and 35 injuries among seafarers and port workers. Additionally, approximately 6,000 sailors and 500 ships remain stranded in the Gulf. Iran has warned of a danger zone covering 1,400 square kilometers where mines may be present and has restricted vessels to a single approved route near the Iranian coast.

Beyond the Gulf, the global energy market is further strained by the Russia Ukraine war, conflict in Libya, and US restrictions on Venezuelan oil. Global refining capacity has decreased by about a tenth, and Russia has banned gasoline and diesel exports. These disruptions have pushed US diesel prices to record levels and contributed to global inflation.