The ongoing conflict involving the United States, Israel, and Iran is poised to cause significant and sustained disruptions in global energy markets, potentially affecting fuel prices for consumers and businesses around the world for weeks or even months. Even if the hostilities were to subside quickly, the damage inflicted on critical energy infrastructure and the logistical challenges in the region could continue to hamper supply chains, leading to elevated costs and uncertainty in fuel availability.
This volatile situation presents a serious economic threat on a global scale, while also creating a delicate political challenge for U.S. President Donald Trump as he approaches the midterm elections. Energy prices are a sensitive issue for voters, who often react strongly to rising costs at the pump and may view foreign military engagements with skepticism. The intersection of geopolitical tensions and domestic economic concerns adds complexity to the administration’s position.
Financial analysts at JP Morgan have noted a shift in the energy market’s dynamics, moving beyond abstract geopolitical risks toward tangible operational disruptions. The closure of refineries and constraints on exports are beginning to impact crude oil processing and regional supply flows, signaling a more immediate and practical challenge for the global energy supply chain. This transition underscores the severity of the conflict’s impact on the energy sector.
Since the conflict began, approximately 20% of the world’s crude oil and natural gas production has been suspended. Tehran’s strategic targeting of vessels in the Strait of Hormuz—a critical maritime chokepoint between Iran and Oman—along with attacks on energy infrastructure throughout the region, have severely disrupted supply routes. This has caused global oil prices to surge by more than 25%, directly translating into higher fuel costs for consumers worldwide.
The near-total shutdown of the Strait of Hormuz has forced major oil producers in the Middle East, including Saudi Arabia, the United Arab Emirates, Iraq, and Kuwait, to halt shipments amounting to nearly 140 million barrels of oil. This volume equates to roughly 1.4 days of global oil demand, highlighting the scale of the disruption. As a consequence, storage facilities in the Gulf are rapidly reaching capacity, compelling oil fields in Iraq and Kuwait to reduce production. Industry experts suggest that the UAE may soon follow suit, further tightening supply.
A source within a regional state oil company, speaking anonymously, warned that if vessels do not resume operations soon, widespread shutdowns of oilfields could become inevitable. Amir Zaman, head of the Americas commercial team at Rystad Energy, emphasized that even if the conflict ends swiftly, restoring production to pre-conflict levels could take considerable time. The recovery period depends on factors such as the type and age of the oil fields and the extent of the shutdowns, which may range from days to several months.
Meanwhile, Iranian forces continue to target critical energy infrastructure, including refineries and export terminals, causing further operational shutdowns. Some facilities have sustained severe damage requiring extensive repairs. For instance, Qatar declared force majeure on its substantial natural gas exports following drone attacks attributed to Iran. Given that Qatar supplies about 20% of the world’s liquefied natural gas (LNG), this disruption has significant global implications. Recovery to normal production levels is expected to take at least a month.
Similarly, Saudi Aramco’s massive Ras Tanura refinery and crude export terminal have been forced to close due to attacks, although details regarding the extent of the damage remain scarce. The White House has defended its military actions against Iran by citing an imminent threat to U.S. security, while President Trump has expressed concerns over Iran’s nuclear ambitions, framing the conflict within a broader strategic context.
The safety and accessibility of the Strait of Hormuz remain critical questions for the energy market’s future. Although a swift resolution to the conflict would help stabilize markets, returning to pre-war supply levels and price stability could take weeks or even months, depending on the damage to infrastructure and shipping lanes. Energy analysts like Joel Hancock from Natixis CIB note that while structural damage has not yet been confirmed, the ongoing risk persists as long as hostilities continue.
In response to the heightened risks, President Trump has proposed naval escorts for oil tankers and pledged U.S. insurance support for vessels operating in the region. However, ensuring the long-term security of this vital waterway may prove difficult, as Iran possesses the capability to sustain drone attacks on shipping for an extended period, intelligence and military assessments.
The conflict may also prompt countries to bolster their strategic petroleum reserves in the aftermath, highlighting the vulnerability of thin inventories. This precautionary increase in stockpiling would drive up demand for oil and help maintain elevated prices even after the fighting ceases.
Meanwhile, the ripple effects of disrupted energy shipments are being felt acutely across Asia, a region heavily dependent on Middle Eastern oil, which accounts for about 60% of its crude imports. In India, the state-owned Mangalore Refinery and Petrochemicals Limited (MRPL) has declared force majeure on gasoline exports due to supply shortages. Other refineries in China have similarly reduced operations, with Beijing instructing fuel producers to suspend exports. Thailand and Vietnam have also halted fuel and crude shipments, respectively, further illustrating the widespread impact.
These disruptions have inadvertently benefited Russian crude producers. The United States granted Indian refiners a 30-day waiver to purchase Russian oil, compensating for lost Middle Eastern supplies despite previous U.S. pressure on India to reduce Russian imports under threat of tariffs. This shift underscores the complex geopolitical realignments triggered by the conflict.
In Japan, the world’s second-largest LNG importer, baseload power futures for Tokyo surged by over 30% in anticipation of rising fuel costs. Similarly, in South Korea, motorists have been queuing at petrol stations amid fears of further price increases. European consumers are facing a compounded challenge, as the region continues to grapple with gas supply shortages following sanctions on Russian energy imports after the 2022 invasion of Ukraine. Europe has turned to LNG imports to offset the shortfall, but now requires an additional 180 LNG cargoes compared to last year to replenish gas storage ahead of the next winter season.
While the United States has become the world’s largest oil and gas producer in recent years, reducing its direct vulnerability to supply shocks, domestic fuel prices still rise in tandem with global crude markets. This has led to higher pump prices nationwide, with the average retail gasoline price reaching $3.32 per gallon and diesel climbing to $4.33 per gallon, marking significant increases over the previous week. These price surges pose a notable political risk for President Trump and his Republican allies as they prepare for the upcoming midterm elections, given the strong public sensitivity to fuel costs.
Mark Malek, chief investment officer at Siebert Financial, highlighted the psychological impact of gasoline prices, describing them as the most visible form of inflation that consumers encounter daily. This underscores how energy market disruptions can quickly translate into broader economic and political consequences, shaping voter sentiment and influencing policy debates in the months ahead.
