War in Iran triggers unprecedented disruption in global oil

War in Iran triggers unprecedented disruption in global oil

By Claire Cameron edited by Andrea Thompson

The war in Iran has choked the world’s supply of oil to a “pipe”, the International Energy Agency said in a new report released on Thursday. According to the organization, which tracks and helps set policy for the global energy sector, the growing conflict in the region has created an unprecedented disruption to the global oil market – one that will almost certainly force energy and other fuel-dependent costs to rise.

Importantly, the agency said the diesel and jet fuel markets are “particularly vulnerable” to the war’s effects on fossil fuel production in the Middle East.

The reason Iran has such influence over fossil fuels has to do with a peculiar feature of geology. The country sits on top of where the Arabian tectonic plate is crushing into the Eurasian plate. This continental collision gave rise to the Zagros Mountains, which push down on the Arabian Plate in a way that has created a basin in the Earth’s crust that traps hydrocarbons – hence all that oil and gas. The region contains about 12 percent of the world’s oil, according to a 2024 estimate.

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Around a fifth of the world’s shipments of oil and liquid natural gas pass through a narrow stretch of sea called the Strait of Hormuz, which separates the Persian Gulf and the Gulf of Oman. Iran effectively controls the strait, and when the US and Israel launched the war on February 28, Tehran closed the waterway.

Global oil supplies are set to fall by eight million barrels a day in March, the IEA said, while facilities for the production of liquefied natural gas and gasoline in the region have also basically stopped production. The loss of oil will be partially offset by the decision by the IEA’s 32 member countries to release 400 million barrels of oil from their emergency reserves – the largest payout of its kind ever in history, but just enough to cover a few weeks of lost shipments from the Strait of Hormuz.

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