The International Energy Agency (IEA) released its March International Oil Market Report recently, stating that the military operations launched by the United States and Israel against Iran at the end of February triggered the largest supply disruption in the history of the global oil market. As oil transportation through the Strait of Hormuz was blocked, the current export volume of crude oil and refined products in the Gulf region is less than 10% of the pre-conflict level, and oil-producing countries in the Gulf region have had to cut their total oil production. If shipping traffic cannot resume quickly, supply losses are expected to increase further. Data shows that in 2025, an average of 20 million barrels of crude oil and oil products passed through the Strait of Hormuz every day, accounting for about a quarter of the world's seaborne oil trade.
To mitigate the negative economic impact of supply disruptions on various countries, on March 11, the 32 member countries of the International Energy Agency (IEA) unanimously agreed to release 400 million barrels of oil from their emergency reserves into the market, which is the largest-ever oil reserve release by IEA members. These emergency reserves will be released into the market within an appropriate time frame based on the national conditions of each member country, and some countries will also take additional emergency measures to respond.
Currently, global crude oil and product oil inventories exceed 8.2 billion barrels, the highest level since February 2021. About half of these inventories are stored in OECD countries, whose member states hold emergency oil stocks of more than 1.2 billion barrels, along with 600 million barrels of industrial oil stocks held by the government. This coordinated release of inventories marks the sixth time since the establishment of the International Energy Agency in 1974.
The report forecasts that global oil supply will plummet by 800,000 barrels per day in March, with an additional 2 million barrels per day of condensate and natural gas liquids ceasing production. The decline is mainly driven by Iraq, Qatar, Kuwait, the United Arab Emirates and Saudi Arabia in the Gulf region. As very few vessels are currently able or willing to load oil at Persian Gulf ports and domestic oil storage facilities in Gulf oil-producing countries are at full capacity, oil producers in the region are cutting output or halting production. However, the production cuts in the Middle East can be offset by increased output from non-OPEC+ oil-producing countries, Kazakhstan and Russia. The report projects that global oil supply will grow by an average of 1.1 million barrels per day in 2026, with non-OPEC+ oil-producing countries accounting for the entire increase.
Supply disruptions are not limited to upstream production and exports; multiple refineries and natural gas processing plants in the Gulf region have also been forced to shut down due to attacks or security concerns. The closure of the Strait of Hormuz has also forced refineries in the region to cut processing capacity or halt production entirely as refined product storage tanks reach full capacity. Reports show that in 2025, oil-producing countries in the Gulf region were able to export 3.3 million barrels per day of petroleum refined products, as well as 1.5 million barrels per day of liquefied petroleum gas. Affected by the current regional tensions, more than 3 million barrels per day of refining capacity in the Gulf region has been shut down at present. Meanwhile, although other regions of the world may increase processing volume, insufficient feedstock supply has limited the scale of production increase. The diesel and aviation fuel markets are particularly vulnerable to the continuous decline in Middle Eastern oil production and exports.
The report predicts that the large-scale flight cancellations in the Middle East have significantly reduced global aviation fuel demand. The sharp drop in liquefied petroleum gas (LPG) supplies has forced petrochemical plants to cut polymer production, leading to supply disruptions. In particular, India and East Africa, which rely heavily on Middle Eastern LPG, will also face security risks of insufficient energy supply. The report has lowered its previous global oil demand forecast for March and April by approximately 1 million barrels per day. It is expected that global oil consumption will grow by 640,000 barrels per day year-on-year in 2026, a decrease of 210,000 barrels per day compared with the forecast released last month.
Market analysts believe that while the coordinated emergency stock releases by member countries of the Organisation for Economic Co-operation and Development (OECD) have provided an important and necessary buffer for the market, if the geopolitical tensions in the Middle East fail to ease rapidly, the stock releases will only be a stopgap measure. The ultimate impact of the military strikes launched by the United States and Israel against Iran on the international oil and natural gas markets depends not only on the timing and intensity of the military strikes, particularly the extent of damage to energy assets and infrastructure in the region, but also on the duration of the suspension of shipping through the Strait of Hormuz.
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