US-Iran War is Causing the Largest Disruption of Oil Supply in History

The war between the US, Israel, and Iran has caused the largest oil supply disruption in the history of global energy markets, the International Energy Agency said in its March 2026 Oil Market Report released Thursday.

Oil flows through the Strait of Hormuz have plunged from around 20 million barrels per day before the war to a trickle, as attacks on commercial shipping and Iran's effective closure of the waterway have ground tanker traffic to a near halt. The strait carries roughly 20 percent of the world's daily oil and gas supply.

Strait of Hormuz Closure Sends Oil Supply and Prices into Crisis

Brent crude futures briefly surged to nearly $120 per barrel before easing back to around $92, still $20 higher than before the war began. On Thursday, Brent closed above $100 for the first time since August 2022 after Iran's new supreme leader, Mojtaba Khamenei, vowed to keep the strait closed. Khamenei, who succeeded his father Ali Khamenei following the latter's death in the opening US-Israeli strikes on February 28, said Iran would continue attacking US bases and keep the waterway shut.

Gulf producers have cut total oil production by at least 10 million barrels per day as storage fills up and export routes remain blocked. Global oil supply is projected to fall by 8 million barrels per day in March. Three more ships were struck by projectiles overnight Wednesday into Thursday, one near the UAE and two in Iraqi waters, following reports of three previous vessels being hit on Wednesday alone, according to the UK Maritime Traffic Operations Center.

IEA Record Oil Reserve Release Falls Short of Oil Supply Gap

In response, IEA member countries unanimously agreed on March 11 to release 400 million barrels of oil from emergency reserves, the largest coordinated stockpile drawdown in the agency's history since it was founded in 1974. The US separately announced it would contribute 172 million barrels from its Strategic Petroleum Reserve.

But analysts warn the release may not be enough. Bob McNally, president of Rapidan Energy Group, said IEA drawdowns can at best offset only a fraction of the roughly 15 million barrels per day net supply loss from the ongoing halt to tanker transits through the strait. He said prices would likely keep rising until either a ceasefire or military degradation of Iran's attack capabilities allows shipping to resume.

The IEA estimates that widespread flight cancellations across the Middle East and major disruptions to LPG supplies will reduce global oil consumption by roughly 1 million barrels per day during March and April.

President Trump, meanwhile, appeared to play down the economic impact. Writing on Truth Social on Thursday, he said the United States as the world's largest oil producer stands to benefit from rising prices, while framing the war primarily as a mission to stop Iran from acquiring nuclear weapons.