War in the Middle East Disrupts Global Energy Supply Chain

Attacks on Gulf energy infrastructure and the Strait of Hormuz threaten China's discounted oil imports and raise manufacturing costs worldwide.

Mar. 28, 2026 at 11:08am by Ben Kaplan

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As the war in the Middle East escalates, with Iran targeting energy infrastructure across the region, the global energy supply chain is facing severe disruptions. The Strait of Hormuz, a critical chokepoint for oil and gas exports, has been effectively disrupted, while attacks on Gulf states' energy facilities have cut production. This is having a significant impact on China's discounted oil imports from Iran and Venezuela, as well as driving up manufacturing costs across Asia. The resilience seen in Dubai amid the ongoing attacks is now being tested as volatility in oil, LNG, and gasoline prices becomes the new normal.

Why it matters

The Middle East conflict is not just a regional issue, but one that has far-reaching global implications. The Strait of Hormuz is a vital global energy chokepoint, with 20% of the world's petroleum liquids and most of the Gulf states' LNG exports passing through it. Disruptions to this supply chain will impact energy prices and manufacturing costs worldwide, particularly in major Asian economies that rely heavily on the region's energy exports.

The details

Iran has been targeting energy infrastructure across the Gulf states, including attacks on facilities in Qatar, the UAE, Bahrain, and Saudi Arabia. These attacks have impacted up to 17% of Qatar's LNG export capacity and struck the Shah gas field in the UAE. If Iran is able to continue these attacks and deplete the Gulf states' defensive capabilities, it will leave them in an even more vulnerable economic and military position. Additionally, the potential closure of the Strait of Hormuz, either through blockade or shippers' unwillingness to risk asset loss and rising insurance costs, would halt up to a fifth of the global oil and LNG supply, further exacerbating the situation.

  • Two weeks ago, the author witnessed the UAE air defense system intercepting multiple drones, one of which struck near the U.S. consulate in Dubai.
  • In 2024, 83% of the oil and gas exports through the Strait of Hormuz were destined for Asia, including China, South Korea, Japan, India, and Taiwan.

The players

Iran

A major producer of crude oil and holder of large known reserves, Iran is targeting energy infrastructure across the Gulf states as part of its strategy to attack the U.S. presence in the region.

China

China imports almost all of the oil Iran exports, taking advantage of heavily discounted prices due to sanctions. China stands to lose up to 20% of its seaborne oil imports if the war in the Middle East continues to escalate.

Strait of Hormuz

A critical global energy chokepoint, the Strait of Hormuz is responsible for 20% of the world's petroleum liquids and most of the Gulf states' LNG exports.

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What they’re saying

“Brother, look at the sky!”

— Uber driver

What’s next

If the war leads to a regime change in Iran more favorable toward the West, or Iran's ability to export discounted oil to China is impacted by either military action or the lifting of sanctions, China will be forced to aggressively diversify its seaborne oil imports.

The takeaway

The war in the Middle East has far-reaching global implications, disrupting the vital energy supply chain that underpins the world economy. The resilience seen in Dubai amid ongoing attacks is now being tested as volatility in oil, LNG, and gasoline prices becomes the new normal, underscoring the deep interconnectedness of global energy security.