The recent escalation in the US-Israel conflict with Iran has led to a widening series of attacks on oil and gas facilities across the Middle East, impacting critical infrastructure in Qatar, Bahrain, Oman, the UAE, and Saudi Arabia. This has intensified global supply concerns and contributed to rising oil prices.

Immediate Impacts and Key Incidents

A drone attack targeted the Port of Fujairah in the UAE, a crucial global energy hub located outside the Strait of Hormuz, causing fires and a temporary suspension of oil-loading operations. Although operations later resumed, their status was unclear. Concurrently, US President Donald Trump threatened additional strikes on Iran's main oil export terminal, Kharg Island, which ships about 90% of Iran's oil exports. While a prior US attack on Kharg targeted military sites, the threat to oil infrastructure remains, prompting Iran to reiterate its threat to attack US-linked energy infrastructure in the region if its own is hit.

Market and Supply Disruption Analysis

The conflict has triggered significant market volatility and supply disruptions. Benchmark Brent crude and West Texas Intermediate futures rose following the attacks. Analysis from Rystad Energy indicates that over 12 million barrels of oil equivalent per day of Middle East production has been taken offline since the Strait of Hormuz closure, including 7 million barrels per day of oil supply—roughly 7% of global liquids demand. Iraq has been hardest hit, with over 60% of its pre-conflict volume curtailed. A worst-case scenario projects Middle East oil output could fall to about 6 million bpd, a 70% regional reduction. Experts warn that further cuts are possible as storage fills, bypass infrastructure reaches its limit, and the conflict continues, with recovery to pre-conflict levels expected to take months.

Strategic and Long-Term Risks

The strategic chokepoint of the Strait of Hormuz remains central to the crisis. ING analysts note that even military strikes pose supply risks, as Iranian oil is a major user of the Strait, and targeting its infrastructure increases the risk of Iranian retaliation against regional energy assets, potentially prolonging supply disruptions. Verisk Maplecroft analysts emphasize that the extensive damage to infrastructure will dent investor sentiment and raise project costs through increased security needs and insurance premiums. They also warn that even a ceasefire would leave a latent risk of renewed conflict without a permanent solution to Iran's confrontations with the US and Israel.

Global Response

In response to the unprecedented supply disruption, described by the International Energy Agency (IEA) as the largest in the history of the global oil market, the IEA member countries are releasing emergency reserves. A total of 400 million barrels of oil will be made available, with stocks from Asia Oceania being released immediately and stocks from the Americas and Europe becoming available from the end of March. The IEA also highlighted that adequate insurance mechanisms and physical protection for shipping are key to resuming oil flows.