(Bloomberg) — President Donald Trump’s decision to strike Iran creates new risks for a significant chunk of the world’s oil supply.
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The Islamic Republic itself pumps more than 3 million barrels a day, or 3% of global output, making it the fourth-largest producer in OPEC. But the nation wields far greater influence over the world’s energy supplies because of its strategic location.
Iran sits on one side of the Strait of Hormuz, the shipping lane for about a fifth of the world’s crude from key suppliers including Saudi Arabia and Iraq. Traffic transiting the waterway dropped off sharply following the regional attacks that started Saturday, and three ships have reportedly been targeted near the mouth of the Persian Gulf.
Here are the pressure points to watch in oil as events unfold.
Regional Dangers
On Saturday, ships reported hearing a radio broadcast purporting to come from the Iranian navy, announcing that transit through the Strait of Hormuz had been banned. But there was no official confirmation and Iranian Foreign Minister Abbas Araghchi said Sunday his country had no intention of shutting the vital shipping route, though there are clear signs that tankers are staying away.
Iran has long claimed that a full closure of Hormuz is within its power, but it’s an extreme step never taken before — and a nightmare scenario for global markets.
Hormuz is the chokepoint for the bulk of the Persian Gulf’s exports of crude, as well as refined fuels such as diesel and jet fuel. Qatar, one of world’s biggest liquefied natural gas exporters, also relies on the strait. LNG trade through the waterway is now all but halted, ship-tracking data show.
Routes Out of the Gulf
OPEC members Saudi Arabia and the United Arab Emirates have some ability to reroute their oil via pipelines that avoid Hormuz.
Saudi Arabia can divert some shipments by using a 746-mile pipeline that runs across the kingdom to a terminal on the Red Sea, where the oil can be loaded onto vessels for onward transport. The East-West Pipeline is able to carry 5 million barrels of crude a day.
The UAE can bypass the Strait of Hormuz to a smaller degree, using a pipeline that runs from its oil fields to a port along the Gulf of Oman. The Habshan-Fujairah pipeline has the capacity to move 1.5 million barrels of crude a day.
Iraq, OPEC’s second-largest producer, has a pipeline that runs through Turkey to the Mediterranean coast. But this can only carry oil pumped from fields in the north of the country, so almost all of its crude exports are shipped by sea from the port of Basra and pass through the Strait of Hormuz.
Kuwait, Qatar and Bahrain have no option but to ship their oil through the waterway.
Even with these alternative pipeline routes, any closure of the strait would still cause a massive disruption to exports and drive up crude prices.
Saudi Arabia and some other Persian Gulf producers recently accelerated oil exports as America’s deployment of military assets to the Middle East fueled tensions in the region. Saudi crude shipments averaged about 7.3 million barrels a day in the first 24 days of February, the most in almost three years.
On Sunday, key members of OPEC+ — led by Saudi Arabia and Russia — also agreed to resume output increases next month at a slightly accelerated pace. They’ll add 206,000 barrels a day in April, according to a statement after their monthly video conference.
Attack Targets
There have been abundant signs the war is widening, with Iranian missiles striking buildings in Tel Aviv, while defenses in Saudi Arabia, Qatar, Bahrain and Kuwait intercepted incoming projectiles. Dubai’s main airport has been hit, and almost all civilian air traffic is closed across the Gulf.
Sunday also brought the first maritime attacks since war broke out. Two of three reported incidents occurred in the Strait of Hormuz, off the Omani exclave of Musandam, while a third happened further south, off Muscat, the UK Maritime Trade Operations Centre said.
DP World suspended operations at Jebel Ali in Dubai, the Middle East’s largest container port, while top container line MSC Mediterranean Shipping Co. said it was halting all bookings for worldwide cargo to the region until further notice.
The developments underscore the growing concern about maritime security as the conflict spreads. As far as the Strait of Hormuz is concerned, many observers say that harassment of shipping is more likely than a closure of the waterway, since it’s improbable that Iran could keep it shut for long.
During last year’s war with Israel and the US, almost 1,000 vessels a day had their GPS signals jammed near Iran’s coast, contributing to one tanker collision. Sea mines are another long-threatened option for deterring shipping.
Iran’s Production
Iran’s oil output has risen to about 3.3 million barrels a day from less than 2 million barrels a day in 2020, despite continued international sanctions. The country has become more adept at skirting these restrictions, sending about 90% of its exports to China.
The nation’s largest oil deposits are Ahvaz and Marun and the West Karun cluster, all in Khuzestan province, which is at the northern end of the Persian Gulf and borders Iraq.
Iran’s main refinery, built at Abadan in 1912, can process more than 500,000 barrels a day. Other key plants include the Bandar Abbas and Persian Gulf Star refineries, which handle crude and condensate, a type of ultra-light oil that’s abundant in Iran. The capital, Tehran, has its own refinery.
For Iran’s overseas shipments, the Kharg Island terminal in the northern Persian Gulf is the main logistical hub. There was an explosion on the island Saturday, according to Iran’s semi-official Mehr news agency, which didn’t provide more details or make any reference to the oil terminal.
Kharg Island has numerous loading berths, jetties, remote mooring points and tens of millions of barrels of crude storage capacity. The facilities have handled export volumes exceeding 2 million barrels a day in recent years.
US sanctions discourage most potential buyers of Iran’s crude, but private Chinese refiners have remained willing customers, provided they get steep discounts. Tehran relies for its international shipments on a fleet of aging tankers that mostly sail with their transponders deactivated to avoid detection.
Last month, Iran was rapidly filling tankers at Kharg Island, probably in an effort to get as much crude on the water and move vessels out of harm’s way in case the facility was attacked. It made a similar move last June ahead of Israeli and US attacks.
Any strike on the Kharg Island terminal would be a desperate blow for the country’s economy.
Iran’s main natural gas fields are further to the south along the Persian Gulf coast. Facilities at Assaluyeh and Bandar Abbas process, transport and ship gas and condensate for domestic use in power generation, heating, petrochemicals and other industries.
The area is the main point for Iran’s condensate exports. During the June war, an attack on a local gas plant sparked jitters among traders, but didn’t cause a lasting spike in oil prices because it didn’t affect any export facilities.
Market Reactions
Oil surged the most in more than three years during the June war, with Brent crude rising above $80 a barrel in London. However, the gains quickly faded once it became clear that key regional oil infrastructure hadn’t been damaged.
Since then, concerns about an oversupply have dominated global markets, with crude in London ending 2025 about 18% lower than where it started.
Despite those fears of a glut, prices have surged 19% this year, partly due to anxiety around potential US strikes on Iran.
With the main oil futures markets closed for the weekend, there’s limited insight into how traders are reacting to the latest attacks. However, a retail trading product, run by IG Group Ltd., was pricing West Texas Intermediate as high as $75.33, a gain of as much as 12% from Friday’s close.
For global benchmark Brent, the strikes are likely to push the market toward $80 in the “near term” as a “widening escalation cycle” is priced in, Bloomberg Intelligence analysts Will Hares and Salih Yilmaz wrote in a note.
–With assistance from Lisa Beyer.
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