Theme of the Day: Iran war is causing ‘largest disruption in history’ to oil supplies - IEA

Global oil markets are suffering “the largest supply disruption in history” as the war in Iran drives production to the lowest level in four years, the International Energy Agency said. Gulf producers had cut oil production by at least 10mn barrels a day because the Strait of Hormuz was almost impassable to shipping, it said. The IEA expects world output to fall by 8mn b/d in Mar as a result. This represents a decline of more than 7% the roughly 107mn b/d produced in Feb. “The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” the IEA report said. Big supply reductions have been seen in Iraq, Qatar, Kuwait, the UAE and Saudi Arabia, but declining production in the Gulf would be partly offset by increased output from Kazakhstan and Russia and by non-OPEC+ producers, said the IEA. Saudi Arabia and the UAE are rerouting some of their exports through ports outside the Gulf. Saudi Arabia hit a record daily level of exports through its western ports of 5.9mn b/d on 9 Mar, said the IEA. In 2025, flows through this route were just 1.7mn b/d. Abu Dhabi National Oil Co loaded an average of 2.4mn b/d from the port of Fujairah between 4 Mar and 9 Mar, said the IEA. The port is connected to an oil pipeline from Adnoc’s production hub in Habshan and the 42mn-barrel Al-Mandous crude storage cavern. Global oil supply is projected to plunge by 8 mb/d in Mar, with curtailments in the Middle East partly offset by higher output from non-OPEC+ producers, Kazakhstan and Russia following disruptions at the start of the year. While the extent of losses will depend on the duration of the conflict and disruptions to flows, we estimate global oil supply to rise by 1.1 mb/d in 2026 on average, with non-OPEC+ producers accounting for the entire increase. The severity of the impact on global supplies would depend on the duration of the conflict, the IEA said, but it estimates that global oil supply will rise by 1.1mn b/d on average in 2026. This is a much lower forecast than the IEA issued a month ago, when it said global supply was on track to increase by 2.4mn b/d this year. The co-ordinated emergency stock release provides a significant and welcome buffer, but in the absence of a swift resolution to the conflict, it remains a stop-gap measure. The ultimate impact on oil and gas markets and the broader economy from the conflict will depend not only on the intensity of military attacks and any damage to energy assets, but also, crucially, on the duration of disruptions to shipping through the Strait of Hormuz. The conflict is also having a significant impact on global product markets, with export flows through the Strait at a near standstill. Gulf producers exported 3.3 mb/d of refined products and 1.5 mb/d of LPG in 2025. More than 3 mb/d of refining capacity in the region has already shut due to attacks and a lack of viable export outlets. Runs elsewhere will be increasingly limited due to feedstock availability. IEA Member countries unanimously agreed on 11 Mar to make 400 mb of oil from their emergency reserves available to the market to address disruptions stemming from the war in the Middle East. Global observed oil stocks were 8,210 mb in Jan, their highest level since Feb 2021. The OECD accounted for 50%, Chinese crude stocks 15%, oil on water 25%, with the remainder in other non-OECD countries. Best regards,