The escalating conflict between the United States, Israel, and Iran, marked by military strikes and retaliatory actions, has thrust the global oil market into turmoil. As of March 1, 2026, Iran’s threats to close the Strait of Hormuz—a narrow waterway handling about 20% of the world’s oil trade—have already led to voluntary halts in tanker traffic, spiking prices, and raising fears of prolonged disruptions.
This article examines the potential impacts on oil shipments from key Gulf countries, the role of alternative pipelines, rising costs from insurance and tanker rates, the tightening of sanctions on Russia’s “dark fleet,” and what it all means for investors.
The Strait of Hormuz: A Critical Chokepoint Under Threat
The Strait of Hormuz, controlled by Iran, is the lifeline for oil exports from the Persian Gulf. In 2024, it facilitated the transit of around 20 million barrels per day (bpd) of crude oil and refined products, valued at approximately $500 billion annually.
Iran’s Revolutionary Guards have reportedly warned ships against passage, leading to over 150 tankers anchoring outside the strait and a near-standstill in commercial traffic.
If the conflict prolongs, analysts warn of oil prices surging past $100 per barrel, potentially tipping the global economy into recession.
While some countries have developed bypass routes, most remain heavily reliant on sea-borne shipments through the strait. The crisis is testing these alternatives, with collective bypass capacity estimated at over 12 million bpd, though deploying it fully would strain terminal infrastructure.
Below, we break down the impacts by country.
Country-by-Country Impacts on Oil Shipments
Saudi Arabia
As the world’s largest oil exporter, Saudi Arabia shipped about 6.2 million bpd in 2023, with 75% going to Asia via the Strait of Hormuz.
However, the kingdom has invested in bypass infrastructure to mitigate risks. The East-West Pipeline (Petroline), stretching 1,200 km from Abqaiq to Yanbu on the Red Sea, has a capacity of 7 million bpd following a $250 million upgrade.
This allows rerouting away from Hormuz, with 18% of seaborne exports already originating from Yanbu in Q2 2024 to avoid Houthi threats in the Bab el-Mandeb.
Saudi Arabia’s major fields, like Ghawar and Safaniya, feed into this network, providing flexibility. In a full Hormuz closure, shipments could drop by 5-6 million bpd initially, but the pipeline could offset much of this, though Red Sea terminals might face overload.
Overall, Saudi exports might see a 20-30% short-term hit if the conflict escalates.
United Arab Emirates (UAE)The UAE exports around 2.1 million bpd of crude, mostly through Hormuz to Asia.
It has the Abu Dhabi Crude Oil Pipeline (ADCOP), operational since 2012, carrying 1.5 million bpd to Fujairah on the Gulf of Oman, bypassing the strait.
ADNOC is advancing a new 1.8 million bpd pipeline from Jebel Dhanna to Fujairah, set for 2027, which could double overland capacity.
With refineries like Ruwais (817,000 bpd) and Jebel Ali (140,000 bpd), the UAE has some domestic processing buffer.
Disruptions could reduce exports by 1-1.5 million bpd, but bypass routes limit the impact to 50% of total flows, making the UAE relatively resilient.
Iraq
Iraq is highly vulnerable, relying almost entirely on southern Gulf terminals at Basra for 3.2 million bpd of seaborne exports in 2024.
The Iraq-Türkiye Pipeline (ITP) to Ceyhan, with 1.2 million bpd capacity, has been closed since March 2023 due to disputes, forcing reliance on Hormuz.
Reopening could provide an alternative for northern Kirkuk fields, but political hurdles remain.
A Hormuz shutdown could halt 80-90% of Iraq’s exports, exacerbating OPEC+ cuts. Asia takes 72% of shipments, with China and India leading.
Expansion projects like Sealine 3 (500,000 bpd by 2027) offer future relief, but current dependence makes Iraq the most exposed.
Iran
Iran exported 1.4 million bpd in 2023, nearly all to China via Hormuz, despite sanctions.
The Goreh-Jask pipeline, launched in 2021, offers a bypass to the Gulf of Oman with 1 million bpd nameplate capacity, but practical throughput is only 350,000 bpd.
Full operations at Jask could reach 1 million bpd by 2025.
As the aggressor in threats, Iran’s own shipments could face self-imposed disruptions or targeted strikes, potentially losing 1-2 million bpd. Buyers like China may struggle to find substitutes, adding $10-12 to global prices.
Other Gulf Countries (Kuwait, Qatar, Oman): Kuwait exports 1.4 million bpd entirely through Hormuz, with no viable alternatives, risking near-total shutdowns.
Qatar, a major LNG exporter, ships 20% of global seaborne gas via the strait, facing similar exposure.
Oman, with ports on the Gulf of Oman, bypasses Hormuz for its 1 million bpd exports, positioning it as a relatively safe haven.
Rising Costs: Insurance Premiums and Tanker Rates
Even without a full closure, the conflict has driven war-risk insurance premiums up by 50%, with some policies being canceled or repriced.
Tanker rates have surged as operators avoid the region, adding $5-10 per barrel to shipping costs.
Brent crude hit $73 per barrel last week, with forecasts averaging $58 in 2026 if disruptions ease, but spiking to $90+ if prolonged.
These factors could tighten supplies, fueling inflation and slowing global growth.
Strengthening Sanctions on Russia’s Dark Fleet
Amid the chaos, Western enforcement of Russia’s sanctions-evading “shadow fleet” has intensified. France seized the tanker Grinch in January 2026, imposing a multimillion-euro fine before release, marking an escalation in cracking down on vessels using false flags and obscure ownership.
Belgium followed with the Ethera seizure on February 28, aided by French forces.
These actions target over 400 aging tankers that have allowed Russia to export 3-4 million bpd despite caps.
Tighter enforcement could reduce Russian flows by 1-2 million bpd, redirecting more to China and raising global prices by $5-10.
Combined with Iran tensions, this amplifies supply risks.
Implications for Investors
For investors, the dual crises spell volatility. Oil prices could rally to $100+ short-term, benefiting upstream producers like ExxonMobil or Saudi Aramco stocks, but prolonged disruptions risk recessions, hurting demand.
Shipping firms face higher rates but elevated risks; insurers like Marsh see premium boosts.
Diversify into alternatives: Renewables or LNG could gain if gas flows are disrupted. Gold and defensive stocks offer hedges against inflation.
Watch OPEC+ responses—recent hikes of 206,000 bpd aim to stabilize, but limited spare capacity (Saudi’s 2-3 million bpd) caps relief.
Long-term, regime change in Iran might flood markets, dropping prices to $50. But the pesky underinvestment for decades will creep back up. The world is operating on 90% of the oil and gas produced in declining fields, and the world is short trillions of dollars of investments.
Investors should monitor vessel movements at Fujairah and Yanbu for bypass efficacy signals.
Sources: jpmorgan.com, usbank.com, theguardian.com, brookings.edu, csis.org
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