Iran War Oil Supply Shock

The Iran war, initiated by U.S. and Israeli attacks on February 28, led to Iran throttling the Strait of Hormuz, causing the biggest energy disruption in history with a peak supply loss of 14 million barrels per day. Despite fears of a catastrophic global energy crunch, the world absorbed the loss due to factors like Saudi Arabia and United Arab Emirates finding alternative export routes, China curtailing buying and utilizing its large reserves, and the International Energy Agency coordinating a record release of 1 billion barrels from strategic reserves. While a preliminary agreement to end the war has been signed, long-term peace remains elusive, and significant damage to energy infrastructure in countries like Saudi Arabia, Kuwait, Qatar, Iraq, and Bahrain will take years to repair. The global economy weathered the shock by drawing down stocks at a record pace, leaving it without a safety net and prone to future price spikes, with the European Union — European Central Bank raising its oil price estimates.