News

The Wall Street Journal reports that the Iran conflict has caused about 15% of global oil supply to be removed from the market. Due to the supply loss, Brent crude oil prices, the world benchmark, are above $100 a barrel, and U.S. gasoline prices are averaging over $4.50 a gallon. The loss of Middle East oil supply has resulted in changes to the oil market, and supply flows with clear winners and losers.  Asia has been hit the hardest because it relies on the Middle East for about 60% of its imported oil. The disruption has also affected petroleum products like diesel and jet fuel, which also transit the Strait of Hormuz, which has effectively been closed to transit by Iran. Non-Persian Gulf producers such as the United States, Russia, and Brazil are exporting greater volumes of oil to replace lost Middle Eastern supply and can somewhat insulate themselves from the price increases caused by the Iran conflict.

In the United States, for example, oil exports have climbed by a third to 5.2 million barrels a day in April after Iran effectively blocked ship traffic through the Strait of Hormuz. The Guardian reports that U.S. exports of jet fuel have doubled to a record high as Europe is looking to secure supplies and airlines are cutting flights. The United States is the world’s largest oil and natural gas producer and a major net exporter of both. While oil and gasoline prices have increased in the United States because oil is a global commodity, natural gas prices have not been affected, as they remain largely determined by U.S. supply and demand.

The U.S. decision to ease sanctions on Russian oil to assist with supplies helped the country to receive higher prices for oil it had already loaded onto tankers. Russia doubled its main source of oil tax revenue in April, keeping its economy from falling into a recession despite using part of the increase to keep domestic fuel prices from escalating. The increased revenues may be short-lived as Ukrainian attacks are hitting Russian infrastructure, and the easing of sanctions is likely only temporary.

South America has significant domestic oil and gas production, large renewable and hydropower resources, and several major sources of future oil and gas supply that lie outside the Gulf. Brazil, Guyana, and Argentina are expected to drive much of the growth in non-OPEC supply. Venezuela is also producing more oil after the United States captured Maduro and set up its new leadership. Venezuela’s oil exports have approached 1 million barrels a day in March, the highest level since 2019, and U.S. refiners that need heavy oil are capitalizing on those exports.

In the Middle East, most of Iran’s neighbors are suffering major losses. Saudi Arabia and the UAE have invested in pipelines to the Red Sea and the Gulf of Oman, allowing each to bypass the Strait of Hormuz for roughly half of its prewar exports. Iraq’s exports have fallen sharply. Kuwait has exported little oil or refined products for 10 weeks. Qatar’s liquefied natural gas exports are offline, and damage to some of the country’s export facilities during the conflict could take considerable time to repair. Iran is losing substantial oil exports as the U.S. blockade hinders crude oil shipments. Because its oil fields and export infrastructure on Kharg Island appear to have suffered relatively little damage to date, Iran may restore exports relatively quickly if and when the strait reopens.

As storage reaches capacity, Middle East producers have been forced to stop production of about 13 million barrels a day. Once the strait reopens, it could take months to restore that supply, especially in Iraq and Kuwait, where large mature fields and aging infrastructure make stoppages harder to reverse. According to Rystad Energy, restarting the Persian Gulf’s shuttered oil and gas fields and drone-damaged infrastructure is expected to cost between $34 billion to $58 billion, and some could take years to restart. So, other non-OPEC sources of supply will be needed, as well as non-Persian Gulf OPEC+ supplies.

China is a large net oil importer and has relied on oil imports from the Middle East, buying 90% of Iran’s oil exports. China’s April bill for crude oil imports rose 13% from a year earlier after it was shut off from exports from Iran and Venezuela. EIA reports that China holds 1,541 million barrels in strategic oil inventories as of the end of the first quarter 2026, 3.7 times the strategic oil inventories of the United States. China is curbing imports through the use of inventories and reduced refinery runs and is reselling crude oil it had contracted to buy to other countries, often at a profit.

China has been working to curb growth in oil consumption through electric vehicles, which accounted for half of all new domestic vehicle sales last year. It has also greatly increased its exports of renewable technologies, particularly solar panels. These have been aided by China’s dominance in mineral mining, especially in processing and refining, which are central to renewable energy. China’s exports of solar technology capacity doubled to a record high in March, the first month of the Iran crisis, to 68 gigawatts–more than Spain’s entire solar power capacity. Exports to Africa rose by 176%, compared with February, and exports to Asia doubled. Countries in the EU, including Italy and Poland, had record solar imports too.

Japan imports meet more than 85% of its energy consumption, and in 2025, nearly all its crude oil imports transited through the Strait of Hormuz. To get through the conflict, Japan has released the equivalent of about 70 days of its oil consumption from its strategic reserves. The Island is energy resource-poor and is heavily dependent on maritime trade for essential goods. Energy security has long been a policy concern in Japan and may result in the country restarting more nuclear reactors and using more coal.

India imports nearly 90% of the crude oil it consumes, with half coming from countries that depend on the Strait of Hormuz for transit before the conflict with Iran began. It is importing oil from Russia—but not at the steep discounts it enjoyed after Russia’s invasion of Ukraine, when sanctions on Russian oil were in effect.

Analysis

The conflict with Iran has led to a reduction in oil supply from the Middle East and higher oil prices. Some non-Middle East oil-producing countries have been able to insulate themselves from the price shocks and are producing more oil to supplement the global market. Asian countries have been hit the hardest due to their heavy reliance on oil supplies from the Middle East. The conflict will most likely lead countries to place greater emphasis on the security of supply.

*This article was adapted from content originally published by the Institute for Energy Research.