PARIS: The Mideast war "is creating the largest supply disruption in the history of the global oil market," as Iran's chokehold on regional supplies forces Gulf producers to slash production, the International Energy Agency said Thursday.
In its latest market report, the IEA said crude production was currently down by at least 8.0 million bpd, with an additional 2.0 million related to petroleum products, including condensates, shut off.
The conflict, which was triggered on Feb. 28 by American-Israeli attacks on Iran, is hampering the global economy's supply of oil and weakening production capacity.
The war has seen Iran tighten its chokehold on the Strait of Hormuz, through which a fifth of global crude passes, effectively all but shutting it down.
IEA said current flows through the strait were moving at less than 10% of pre-crisis levels, which in 2025 were around 15 million barrels per day -- with "no signs of a de-escalation in hostilities or a clear timeline for a recovery in flows through the Strait."
It stressed that a resumption of lows would be key in minimizing the war's impact on global markets.
Against that backdrop, major European stock markets were off by more than 0.5% in early-morning trading. In Asia, Japan's Nikkei shed 1% at the close, while Hong Kong closed down 0.7%.
A threat from Tehran to bring down the global economy overshadowed the impending IEA release of strategic crude. On Wednesday, it said its 32 members had agreed to unlock 400 million barrels of oil from reserves, their largest release ever.
'Stop-gap measure'
"The coordinated emergency stock release provides a significant and welcome buffer, but in the absence of a swift resolution to the conflict, it remains a stopgap measure," the IEA warned.
The United States has proposed partially lifting sanctions against Russia to offset the fallout from the squeeze on the Strait of Hormuz, but the Group of Seven nations on Wednesday rejected the idea.
Oil prices have gyrated since the crisis began, rising more than 30% to around $120 a barrel only to drop back.
Prices again topped $100 Thursday but then fell again to around $92 a barrel, representing a day rise of some six percent as analysts predicted elevated prices for the foreseeable future amid reports of more Iranian attacks on vessels, notably off the coast of Iraq.
The IEA said in its report that the shortfall could be partially addressed by alternative routes, such as transit through the Bab-el-Mandeb Strait from the Red Sea, although this route has, in recent years, "carried a risk of Houthi (rebel) attacks."
Despite efforts to stave off the disruption through emergency stockpiles, the IEA forecast that global oil supplies in March would drop by 8 million bpd to 98.8 million bpd, the lowest level in four years.
"For forecasting purposes, we have assumed only minimal flows through the Strait of Hormuz in March," it stated.
Losses depend on duration of war
The IEA added that supply curtailments in the Middle East are being partly offset by higher output from non-OPEC+ producers, Kazakhstan and Russia. While overall supply losses would depend on the duration of the war, it is estimated that global oil supply would rise 1.1 million bpd in 2026 on average, with non-OPEC+ producers accounting for the entire increase.
Citing the "geopolitical alarm" in the region, Stephen Innes of SPI Asset Management said that "in brokerage jargon, the IEA's decision (to release emergency supplies) is equivalent to using a garden hose to put out a refinery fire."
Kathleen Brooks, director of research at XTB, observed that "the conflict has intensified this week, and the longer the oil price remains elevated, the more damaging and long-lasting the inflation shock will be for the global economy."
The IEA concluded that even if the conflict intensity recedes to the extent oil flows can resume, "it will take several days to weeks" for the backlog of tankers on both sides of the Strait to clear.
"Additionally, shut-in upstream production will take weeks and, in some cases, months, to return to pre-crisis levels depending on the degree of field complexity and the timing for workers, equipment and resources to return to the region.
