Oil Industry Faces Unprecedented Supply Crunch Amid U.S.-Israel War on Iran

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A top oil and refineries analyst at S&P Global discusses the dire implications of the ongoing closure of the Strait of Hormuz, which has disrupted over 12 million barrels per day of global oil supply. He warns the crisis is already the largest supply disruption in history and could have cascading effects on refined products like jet fuel, with the potential to reshape energy security thinking and climate policy worldwide.

Why it matters

The U.S. and its allies are struggling to find a clear path to resolve the crisis and reopen the vital shipping chokepoint, raising concerns about the potential for prolonged supply shortages and price spikes that could severely impact the global economy and undermine progress on climate change.

The details

The crisis began three weeks ago when the U.S. and Israel launched a military campaign against Iran, leading Iran to close the Strait of Hormuz, a critical global oil chokepoint. This has disrupted over 12 million barrels per day of oil supply, or around 12% of global demand. While some rerouting to alternative routes has occurred, the physical supply loss is still massive and has led to acute shortages and price spikes, especially in Asia. Refineries in the region have had to cut runs due to lack of crude, while China and South Korea have restricted exports of refined products, further tightening global markets. Analysts warn the longer the crisis lasts, the more difficult it will be to backfill the supply gap, with potential for severe demand destruction and cascading economic impacts.

• The crisis began three weeks ago when the U.S. and Israel launched military strikes against Iran.
• In the first few days, analysts believed the crisis could be resolved relatively quickly, but that window has now closed.

What they’re saying

What’s next

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