IEA calls the Middle East war "the largest global oil supply disruption in history"
Oil supplies through the Strait of Hormuz have collapsed from about 20 mb/d to a trickle, sending Brent crude back above US$100 and reviving fears that expensive energy and weak growth could collide at an awkward time for long-term investors.
Historic supply shock at a critical chokepoint
The IEA’s March 2026 Oil Market Report finds that the war in the Middle East has triggered the largest supply disruption the global oil market has ever seen.
The IEA says crude and product flows through the Strait of Hormuz have plunged from around 20 mb/d before the war to a near standstill, with limited capacity to bypass the route and storage tanks filling across the Gulf.
With few ships able or willing to load cargoes, Gulf countries have cut total oil production by at least 10 mb/d, the IEA reports.
It estimates at least 8 mb/d of crude and 2 mb/d of condensates and NGLs are currently shut in, with major reductions in Iraq, Qatar, Kuwait, the UAE and Saudi Arabia.
BNN Bloomberg reports that Iran’s new supreme leader, in his first statement since succeeding his late father, said Iran would keep up attacks on Gulf Arab neighbours and use the effective closure of the Strait of Hormuz as leverage against the United States and Israel.
BNN Bloomberg notes that a fifth of the world’s oil typically sails through the strait and that some producers are cutting output because their crude has “nowhere to go.”
On the ground, attacks are hitting physical assets.
The Financial Times reports that suspected Iranian strikes set two oil tankers on fire off Basra and hit a container ship near Dubai’s Jebel Ali.
In Bahrain, fuel tanks at an oil storage facility in Muharraq were set ablaze, with the government blaming “Iranian aggression.”
Oil prices spike, with talk of US$150
Brent crude, the international benchmark, shot up as much as 10 percent to US$101.59 before giving up some gains to trade about 5 percent higher at US$96.35 early in London.
BNN Bloomberg says Brent later climbed 9.2 percent to settle at US$100.46, while a barrel of benchmark US crude rose 9.7 percent to settle at US$95.73.
The IEA notes that since the United States and Israel launched joint air strikes on Iran on February 28, Brent futures have traded “within a whisker” of US$120/bbl and are about US$20/bbl higher for the month.
Analysts quoted by BNN Bloomberg warn that if the Strait of Hormuz remains closed, oil prices could jump to US$150.
Helima Croft, head of global commodity strategy at RBC Capital Markets, told the Financial Times that even “the largest strategic stockpile release in history” may not drive prices, and that the “ultimate price trajectory” will likely depend on when the US secures the Strait of Hormuz.
Record emergency stock release – but only a bridge
To ease the shock, IEA member countries unanimously agreed on March 11 to make 400 mb of oil from emergency reserves available to the market, according to the IEA.
The agency says global observed stocks of crude and products stood at more than 8.2 bn barrels in January, the highest since February 2021, with roughly half in OECD countries, including 1.25 bn barrels in government emergency reserves and 600 mb of obliged industry stocks.
The IEA describes this co-ordinated release as a “significant and welcome buffer,” but calls it a stop-gap measure if shipping through Hormuz does not resume quickly.
It says the impact on oil and gas markets and the wider economy will depend on the intensity of attacks, damage to energy assets and, “crucially,” the duration of shipping disruptions.
Markets reprice energy, growth and inflation risks
The Stoxx Europe 600 fell 0.4 percent, according to the Financial Times.
BNN Bloomberg reports that the S&P 500 dropped 1.5 percent, the Dow Jones Industrial Average lost 1.6 percent and the Nasdaq composite declined 1.8 percent.
Companies with big fuel bills led losses, with cruise-ship operator Carnival down 7.9 percent and United Airlines off 4.6 percent.
In bonds, the yield on the 10-year US Treasury rose to 4.26 percent from 4.21 percent the previous day and from 3.97 percent before the war started.
The outlet notes that higher yields make borrowing more expensive and that, because of the spike in oil, traders have pushed back expectations for when the Federal Reserve could resume interest rate cuts.
BNN Bloomberg also reports that US President Donald Trump has been calling for rate cuts, arguing they would support the economy and job market.
Stagflation fears and Red Sea echoes
BNN Bloomberg says last month’s hiring by US employers was “surprisingly weak,” fuelling worries about “stagflation,” while applications for unemployment benefits inched lower, suggesting layoffs remain limited.
The same outlet notes that even after recent volatility, the S&P 500 is only 4.4 percent below its all-time high set in January, and that US markets have often rebounded relatively quickly from past conflicts when oil prices did not stay high for too long.
Still, some see echoes of the Red Sea crisis.
The Financial Times reports that US President Donald Trump said on Monday the war would be over “very soon,” but cites Anthony Yuen of Citigroup warning that in the earlier war with Iran-backed Houthi rebels, US air power did not stop disruption in the Red Sea.
Yuen told the Financial Times that “people are not factoring in a repeat of the Red Sea disruption” and that if it repeats, “the market is not pricing the severity of what would happen.”
