KEY POINTS
- The International Energy Agency warns the Middle East war has caused the largest oil supply disruption in history, with Gulf producers cutting at least 10 million barrels per day.
- Oil flows through the Strait of Hormuz have collapsed, causing global supply to potentially drop by 8 million barrels per day in March.
- IEA member countries have agreed to release 400 million barrels of emergency oil reserves to stabilise markets as prices surge globally.
The International Energy Agency, IEA, has warned that the ongoing conflict in the Middle East is causing what could become the largest supply disruption in the history of the global oil market, as oil-producing countries in the Gulf scale back production by at least 10 million barrels per day.
In its March monthly oil market report released on Thursday, the agency said the war has sharply curtailed energy supplies worldwide, largely due to the collapse of oil shipments through the strategically vital Strait of Hormuz.
According to the report, crude and refined oil product flows through the Strait of Hormuz, one of the world’s most critical energy shipping routes have fallen dramatically since the conflict escalated.
Before the outbreak of hostilities, roughly 20 million barrels of oil per day passed through the waterway. However, the IEA said shipments have now reduced to a mere trickle as tanker traffic and exports from Gulf countries grind to a near halt.
The agency warned that the limited capacity to reroute oil shipments away from the strait, combined with rapidly filling storage facilities, has forced Gulf producers to significantly cut their output.
“The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” the IEA stated.
“With crude and oil product flows through the Strait of Hormuz plunging from around 20 million barrels per day before the war to a trickle currently, limited capacity available to bypass the crucial waterway, and storage filling up, Gulf countries have cut total oil production by at least 10 million barrels per day,” the report added.
The agency cautioned that supply losses could worsen if shipping routes through the strait are not reopened soon.
Global oil supply projected to plung
The disruption is expected to have immediate consequences for global supply levels. The IEA projects that worldwide supply will drop sharply this month as production cuts and transport disruptions ripple across international markets.
According to the agency, global aupply could decline by about 8 million barrels per day in March.
While some of the supply losses may be partially offset by increased output from non-OPEC+ producers such as Kazakhstan and Russia, the agency noted that the overall market impact remains severe.
The report added that the scale of disruption will largely depend on how long the conflict lasts and how quickly shipping routes can be restored.
Despite the immediate supply shock, the IEA forecasts that global production could increase by about 1.1 million barrels per day on average in 2026, driven entirely by non-OPEC+ producers.
Beyond crude oil production, the conflict is also disrupting global markets for refined petroleum products.
The agency noted that Gulf producers exported approximately 3.3 million barrels per day of refined petroleum products and about 1.5 million barrels per day of liquefied petroleum gas (LPG) in 2025.
