Brent crude prices held near US$85 on Wednesday as hopes for a diplomatic resolution to the Iran-Israel conflict wavered amid renewed military exchanges, with the ongoing war having now stripped roughly one billion barrels of cumulative supply from global oil markets in just three months.
The figure, equivalent to two-and-a-half times the entire US Strategic Petroleum Reserve, underscores the scale of disruption that analysts at Rystad Energy say could nearly double before year-end.
“Cumulative losses have now reached one billion barrels and are on track to nearly double by year-end under our base case, which still assumes a narrow US-Iran deal in June and a phased reopening of the Strait of Hormuz from mid-July,” said Aditya Saraswat, MENA research director at Rystad Energy.
“But that base case is under pressure.
“Each additional month of conflict adds roughly 350 million barrels to cumulative losses, with a growing share that will never come back, as mature fields in Iraq and Kuwait face longer restart timelines than most market participants are pricing in.”
The breadth of the disruption is stark.
Total output across six Gulf producers has fallen to 12.4 million barrels per day (bpd) from 24.2 million bpd before the conflict began in January 2026, leaving 11.8 million bpd shut in.
Saraswat described the situation in stark terms, stating: “With 11.8 million barrels per day shut in across six Gulf producers, the conflict has become the most severe supply disruption in the modern oil era.”
Saudi Arabia accounts for the largest share of lost production at 3.8 million bpd, representing 32 per cent of total shut-ins, followed by Iraq at 2.8 million bpd and Kuwait at 2 million bpd.
Together, those three countries account for nearly three-quarters of all offline volumes.
Iraq faces particular exposure.
Its major southern fields depend almost entirely on seaborne exports through the Strait of Hormuz, and northern pipeline alternatives via Turkey’s Ceyhan terminal remain limited.
The financial toll has been severe: Iraqi oil export revenues collapsed from US$6.8 billion in February to just US$1 billion in April, with May figures expected to fall further.
Saudi Arabia, by contrast, has been better insulated.
Its East-West Pipeline bypass to the Red Sea port of Yanbu has allowed it to redirect crude around the strait, and export revenues reached approximately US$24.6 billion in March 2026, the highest level since 2022.
Vessel movements through the Strait of Hormuz have not recovered meaningfully despite successive rounds of diplomatic talks.
Traffic dropped from a pre-conflict baseline of around 120 vessels per day on February 27 to just 5 to 10 per day through March.
Even after ceasefires and negotiations, April and May transits have largely remained below 20 per cent of pre-conflict levels.
LNG shipments have been among the hardest hit, falling from approximately five vessels per day before the conflict to near zero, leaving Qatar and other Gulf LNG exporters fully sidelined.
Crude and product tankers have similarly failed to normalise, with the pre-conflict run rate of nearly 30 tankers per day reduced to a handful on most days.
Alternative export terminals at Saudi Arabia’s Yanbu and the UAE’s Fujairah initially absorbed some of the shortfall.
Combined international loadings from those facilities climbed from below 2 million bpd in mid-February to above 6 million bpd by early April, briefly peaking near 7.2 million bpd in early May.
That surge has since reversed.
A May 4 attack damaged terminal infrastructure at Fujairah, constraining both power availability and insurance coverage for vessels calling there.
Yanbu faces its own headwinds, including vessel-availability constraints, loading-window congestion, and Houthi interdiction risk in the Red Sea.
Combined bypass flows had retreated to around 4.7 million bpd by late May.
ADNOC has moved to fast-track an expansion of the ADCOP pipeline connecting onshore fields to Fujairah, raising nameplate capacity from 1.8 million bpd to 3.3 million bpd.
The pipeline carries only Murban crude from onshore production.
ADNOC’s offshore grades make up a material share of UAE output but will require additional infrastructure before they can reach Fujairah for export.
Iranian crude loadings averaged 1.64 million bpd in March, the final full month before the US implemented a blockade of Iranian ports on April 13.
Exports dropped to 1.34 million bpd in April and are forecast to fall below 500,000 bpd in May.
US Central Command reported that as of May 27, the blockade had prevented 107 vessels from entering or leaving Iranian ports.
China’s imports of Iranian crude have declined by more than 500,000 bpd in April to around 1.1 million bpd.
Tehran holds an estimated 150 to 160 million barrels of oil on water, a floating buffer that is currently keeping Chinese refiners supplied and sustaining Iranian revenue flows.
That buffer, analysts note, is finite.
Rystad Energy’s base case still assumes a narrow US-Iran agreement in June, followed by a phased reopening of the Strait of Hormuz from mid-July.
Even under that relatively constructive scenario, the production recovery is expected to follow a gradual curve rather than a sharp rebound.
Tanker repositioning is projected to push the initial supply recovery two to three weeks behind the strait’s reopening, with July output recovering just 10 to 15 per cent of shut-in volumes.
A stronger rebound is anticipated in August and September, with regional supply rising toward 17.3 million bpd and 20.9 million bpd, respectively.
Around 85 per cent of lost volumes are expected to be restored by October, with the remaining recovery, concentrated in Iraq and Kuwait’s mature fields, extending into January 2027.
Cumulative supply losses are on track to reach nearly two billion barrels by year-end under that scenario.
“Despite a fragile memorandum of understanding between the US and Iran that had raised hopes of a deal, both sides have since returned to air strikes, narrowing the diplomatic track and widening the tail risk of a prolonged shock,” Saraswat said.
