The war that started with US and Israeli attacks on Iran on February 28, 2026, and escalated throughout the Arabian Gulf, could well be the third Gulf war that will have a wider impact on global energy security and markets. The other two conflicts were the Iran-Iraq war of 1980-1988 and Iraq’s invasion of Kuwait and the war of liberation from August 1990 to February 1991. These and the Arab-Israeli war in October 1973 — and the accompanying oil supply crisis — shaped global oil and energy relations as well as the Middle East and its relationship with the world for decades.

The scope and impact of the third Gulf war affect all Gulf states, all energy resources, and all their related infrastructure, including the safety of navigation through the Strait of Hormuz. This has impacted global supplies of crude oil, petroleum products, and liquefied natural gas (LNG), with the scale of the supply interruptions varying across Gulf countries. For example, Iraq, Kuwait, and Qatar’s crude exports were among the most impacted, given non-existent alternative export outlets. Likewise, all of Kuwait and Bahrain’s product exports, along with Qatar’s LNG exports, have been impacted by the insecurity of passage through the Strait.

The crisis interrupted the flow of an estimated 12mn b/d of crude oil through the Strait of Hormuz, equivalent to around 12% of global oil supply, 83% of Gulf crude exports, and 14% of globally traded crude oil. This included about 3.3mn b/d from Iraq, 1.3mn b/d from Kuwait, 0.6mn b/d from Qatar, 2mn b/d from the UAE, and 5.5mn b/d from Saudi Arabia. As a result, production in these countries fell from around 21mn b/d in January 2026 to 14.0mn b/d in March, with Iraq, the UAE, Kuwait, and Qatar, recording the sharpest decline in crude oil production

The targeting of the Ras Laffan gas facilities in Qatar also led to the shutdown of most of its gas production. With no alternative route for LNG exports except through the Strait, this amounted to about 106bcm from Qatar and 7bcm from the UAE — together roughly 19% of global LNG trade. Along with this LNG, some 30-35% of global production of helium (important for semiconductor, aerospace and electronics manufacturing) is interrupted. The targeting of some regional refineries also halted their operations.

In addition, the interruption of nearly 3.5mn b/d of refined products through the Strait, representing around 15% of international products trade, forced regional refineries, particularly the export-oriented ones in Kuwait and Bahrain, to cut runs or shut down and increase local storage. The presence of more than half of Saudi Arabia’s 3.3mn b/d refining capacity in refineries on the Red Sea coast and the Riyadh refinery, and the flexibility of its supply systems, helped lessen the impact of the closure of the Strait on its exports of refined products (MEES, 3 April). The Strait’s closure also impacted the deliveries of liquified petroleum gases (LPG) to Asia, estimated at around 1.5mn b/d and representing around 29% of its international trade. It also impacted the passage of around 20% of all seaborne fertilizer exports mainly to Asia, potentially driving up global food production costs – and posing inflationary pressures. The Strait is also a vital channel for imports to all the countries surrounding it, including food, medicines and technological supplies.

MITIGATING THE IMPACT

To manage the interruption of its exports from the Arabian Gulf, Aramco rerouted flows to its 7mn b/d East-West Pipeline to the Red Sea coast — roughly 2mn b/d of which serves local refineries on the Red Sea coast — to export through Yanbu, whose crude oil tanker-loading capacity is estimated at 5mn b/d, in addition to product exports of around 1mn b/d. Aramco’s upgrading of the pipeline and port, together with re-routing of the tanker fleet of shipping company Bahri, limited the reduction in Saudi exports and the total disruption to crude supplies from the Strait of Hormuz closure to 9.2mn b/d, and refined products to 2.5mn b/d.

Although Adnoc has a pipeline capable of shipping up to 1.8mn b/d from Abu Dhabi to Fujairah, repeated Iranian targeting of that port reduced its alternative role as an outlet for Abu Dhabi crude exports.

Despite these Hormuz-bypass routes, the crisis still drove up crude oil prices by more than 50%, jet fuel prices almost doubled in some markets, gas prices increased by more than 70%, and there was a 60% increase in the Gulf’s urea prices.

The disruption to crude, products, and LNG supplies affects all countries through higher energy prices, but the impact of the crisis varied across the Gulf countries, importing states, and the global economy. The impact depended on the structure of the oil industry in each country, the degree of diversification of their economies, and their energy, fiscal and monetary policy responses. The impact on the importing countries also varied, with Asia-Pacific states more vulnerable to supply disruptions than Europe and the US. Around 80% of Gulf crude exports go to Asia, primarily China and India, while Qatar supplies roughly 30% of China’s LNG imports, 45% of India’s, and 99% of Pakistan’s.

Energy is important to overall trade and investment relations between Asia and the Gulf. The interruption of supplies and the resulting impact on pricing mechanisms and long-term supply contracts impact Asia’s energy security, and the Gulf countries trade balance with Asia. In 2025, Asia-Pacific imported 50% of its crude, 20% of its refined products, and 29% of its LNG from Gulf countries. By contrast, the United States is a net exporter of all three, while Europe imports around 17%, 20%, and 11% of its needs from the Gulf respectively. Gulf producers exported 2.5mn b/d of refined products (10% of global trade) and 1.5mn b/d of LPG (28% of global trade) to Asia; 45% of which was to India.

The scale of the impact will depend on the duration of the disruptions, the time it takes to bring production back to its pre-crisis levels, and the level of oil and gas prices during and after the crisis. For example, LNG production cannot be resumed easily, because it requires cooling to liquefy it, and once liquefaction units are shut down, they must be re-cooled before resuming production. Crude and refinery production, by contrast, differ from one country to another depending on geology, operating conditions, degrees of damage to the facilities, the governance of the oil sector, and the efficiency of each NOC’s crude and refining operations.

This is not the first time that oil supplies have been affected by geopolitical conflict in the region. Supplies were previously disrupted after the October 1973 war, when Arab states cut crude production to pressure the international community for Israel’s withdrawal from territories occupied in June 1967, followed by an oil embargo on the US and the Netherlands. The supply cuts were around 4.5-5mn b/d for three months, representing 8-8.5% of global oil supply. At the start of the 1980-1988 Iraq-Iran war, around 2.3mn b/d were interrupted for four months (3.6% of global supply). After Iraq’s invasion of Kuwait in August 1990, around 5mn b/d oil supply was interrupted from the two countries over the next 12 months (7.7% of global supply)

It is also not the first time during which navigation in the Gulf has affected supply security. During the Iran-Iraq war, 450 ships and 60 tankers were targeted between 1984 and 1988 in what became known as the “Tankers War.” At that time, the navies of the major powers escorted tankers through the Gulf. Since the Strait itself was not closed, supplies were not interrupted and prices did not rise -they fell and collapsed in 1986 for reasons unrelated to the geopolitical crisis.

The responses to the crisis and other supply crises varied across consuming and producing countries, depending on many logistical and institutional factors. The IEA’s International Energy Program (IEP), which requires member states to maintain emergency oil stocks equal to at least 90 days of imports, and to participate in an allocation mechanism in the event of supply disruption was activated during the supply crises including this one. By the end of 2025, the IEA’s 32 member states held 1.25bn barrels of emergency stocks, enough to cover 28 days of consumption and 50 days of imports, and another 600 million barrels of industry stocks was held under government obligation. On 11 March 2026, the IEA agreed on the largest stocks drawdown in its history, amounting to 412mn barrels, 72% of which crude. By the end of March, total disrupted supply was estimated at 320mn barrels, some 75% of the assumed drawdown. Some of the most affected consumers, such as China and India, are not members of the IEA and did not coordinate their responses with it, limiting the ability of the stock release to mitigate the crisis.

For the IEA, this was the fifth instance of an emergency strategic stock drawdown. In January 1991, out of a 33.75mn barrels stock release plan, only 17.3mn barrels were withdrawn during the war to liberate Kuwait. In 2011, 30mn barrels were released due to the disruption of Libyan supply. After Hurricane Katrina impacted the refining and distribution facilities in the US state of Louisiana, 20.8mn barrels were drawn from an originally planned 40mn barrels. The fourth emergency stock release of 181.7mn barrels followed Russia’s invasion of Ukraine in early 2022. The lower drawdown than planned in some of these cases was due to the role played by spare production capacity held in other countries — mainly Saudi Arabia — the efficiency of markets, the limited scope of the interruption and the speed of recovery, as well as the redirection of oil supplies.

The current crisis differs from the previous conflicts due to the sheer size of disrupted volumes, the number of affected exporting and importing countries, and the effect it has on all hydrocarbons: crude oil, refined products, LNG, petrochemicals, fertilizers, and helium. It also differs because one of the key buffers historically used against supply disruption — spare production capacity — is itself also impaired. Even the operational stocks held by national oil companies at home or abroad are not sufficient to offset the loss of exports caused by the closure of the Strait and the targeting of refineries or storage facilities. These stocks include Aramco’s crude inventories outside Saudi Arabia: 11.2mn barrels in Okinawa and Kiire, Japan, 5.3mn barrels in Ulsan , South Korea, 18.6mn barrels in Zhoushan in China, 6.9mn barrels in Rotterdam, and Aramco’s 37.9mn-barrel share of crude storage at Ain Sokhna and Sidi Kerir in Egypt — a total of around 80mn barrels (MEES, 13 March).

A UNIQUE CRISIS

Compared to the 1973 voluntary oil supply cuts, which were reinstated after the embargo, which sparked a global economic and financial crisis and led to wide range changes in the global energy landscape, the current production disruption differs in many respects.

First, some of the production, refining, processing and delivering infrastructures of the impacted supplies might take longer to rehabilitate (MEES, 20 March).

Second, the current crisis involved the effective closure of the Strait of Hormuz and the interruption of all hydrocarbon supplies.

Third, while the Western hemisphere was more impacted in 1973, the current crisis impact is more on the Asian and the Middle Eastern economies.

Fourth, whereas there were almost no meaningful commercial or strategic reserves in consumer markets in 1973, by the end of 2025 IEA countries had 2.8 bn barrels of commercial oil inventories and 1.25 bn barrels of strategic petroleum reserves, besides the estimated total of 413mn and 50mn barrels of strategic stocks in China and India respectively (850mn and 100mn barrels commercial inventories).

Fifth, while global oil supplies in 1973 were controlled by the international oil companies, which could redirect disrupted supplies through their integrated global networks, supplies from the Gulf countries in the current crisis are managed by their national oil companies. Whether the March 2026 war will produce the kind of fundamental shifts in global energy security, oil and gas markets, and the role of Middle East supplies that followed the 1973 energy crisis, is still not clear.

Compared to all other interruptions, the energy policies of producing and consuming countries played a greater role in mitigating the impact of these crises. Being confined to one or two countries, the quick resumption of production, supply rerouting, and transport investment were all crucial in overcoming past crises. The availability of excess production capacity in Saudi Arabia and its use during the different supply crises since 1973, made Saudi Arabia the “safety valve” of global oil markets, and was in many ways more important than the IEA’s emergency stock release. Even when Saudi oil facilities were attacked in September 2019 causing the loss of 5.7mn b/d of crude production, 0.7mn b/d of natural gas liquids, and 2bn cfd of natural gas, the disruption was mitigated swiftly by stock withdrawals from its domestic and overseas stocks, helped by its ability to quickly restore production, which helped reassure markets and reduce price volatility (MEES, 27 September 2019).

Although the impact of past crises on price levels and volatility varied depending on market conditions, the quick use of spare capacity, the limited size and duration of disruptions, and market expectations all helped mitigate their impact. The oil and gas facilities in the Gulf that are impacted in the current crisis, will still likely play an important role in restoring production. Spare capacity in the region, long regarded as a safety valve in past crises, is not playing its traditional role, and is likely to decline because of lower production, the longer time needed to restore it, and the fact that the priorities of the oil sector in some countries may change after the crisis. Furthermore, Iran and Russia may emerge from the crisis with more resilient production than previously, as the US has eased its oil sanctions regimes and may struggle to fully reimpose them again.

PESSIMISTIC OUTLOOKS

More than a month into the crisis, there has been no breakthrough, or clarity as to how long it would take to restore supplies and rehabilitate production and handling facilities, or where prices will settle in the medium to longer terms. Most scenarios on the war’s geopolitical outcome, its impact on oil and energy relations, and its economic and financial consequences, tend to be pessimistic. These include future oil and gas prices, investment in upstream and downstream, the future of energy transition, and the impact of the crisis on the world economy and the economies of the region.

The IMF estimates that every 10% increase in the oil price reduces annual global GDP growth by around 0.15 percentage points and raises inflation by 0.4 percentage points in the following year, driven by the increased costs of energy and food, with the final impact depending on the duration of the conflict and the damage inflicted on infrastructure. UNCTAD estimates that depending on the duration and depth of the conflict, growth in global merchandise trade is projected to decelerate from 4.7% in 2025 to 1.5% - 2.5% in 2026. UNDP projects that the GDP of the Arab countries of the Middle East will contract by 3.7%-6% in 2026, with the GCC contracting by 5.2%-8.5%, while Oxford Economics projects the GCC’s growth in the first half of 2026 to slow to 2%, compared with a pre-crisis forecast of 4.5%. FDI into the region is projected to slow, as well as visitor arrivals to some previously attractive destinations such as the UAE. Business and investment sentiments will be impacted, along with the financial markets, air transport activity in some countries in both the short and medium term, as well as in sectors most exposed to the interruption of supply chains.

*Prof. Majid al-Moneef  is Chairman of the Saudi Association for Energy Economics and previously served as Saudi Arabia’s Governor to Opec.