The war in Iran has choked the world’s supply of oil to a “trickle,” the International Energy Agency said in a new report released on Thursday. According to the organization, which tracks and helps set policy for the global energy sector, the widening conflict in the region has created an unprecedented disruption in the global oil market—one that will almost certainly force energy and other fuel-dependent costs to rise.
Importantly, the agency said diesel and jet fuel markets are “particularly vulnerable” to the war’s effects on Middle East fossil fuel production.
The reason why Iran has such sway over fossil fuels has to do with a quirk of geology. The country sits on top of where the Arabian tectonic plate is smashing into the Eurasian plate. This continental collision gave rise to the Zagros Mountains, which push down on the Arabian plate in a way that has created a basin in Earth’s crust that traps hydrocarbons—hence, all that oil and gas. The region contains about 12 percent of the world’s oil, according to one 2024 estimate.
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Around a fifth of the world’s shipments of oil and liquid natural gas pass through a narrow stretch of sea called the Strait of Hormuz, which separates the Persian Gulf and the Gulf of Oman. Iran effectively controls the strait, and when the U.S. and Israel ignited the war on February 28, Tehran closed the waterway down.
Global oil supply is set to drop by eight million barrels a day in March, the IEA said, while liquified-natural-gas- and gasoline-making facilities in the region have also basically ceased production. The loss of oil will be offset somewhat by the decision of the IEA’s 32 member countries to release 400 million barrels of oil from their emergency reserves—the largest ever disbursement of its kind in the organization’s history but only just enough to cover a few weeks’ worth of lost Strait of Hormuz shipments.