Importance of the oil and gas industry
The oil and gas industry is one of the most important industries in the world. It powers transportation, manufacturing, electricity generation, and many everyday products. Because of this, any disruption to oil and gas production can quickly affect economies and daily life.
Israel-US & Iran Conflict in the middle east
The ongoing conflict between Israel-US & Iran in the Middle East, which began on 28 February, is already creating uncertainty in the global energy market. The region is responsible for a large share of the world’s oil production, and tensions there can influence oil prices, supply chains, and the cost of every barrel of oil used around the world.
This article explains how the conflict could affect offshore energy operations, oil exports, and global oil and gas production.
Why is Middle East Is Important for Oil and Gas Production?
The Middle East is one of the largest producers of oil and gas in the world. Many countries in this region operate large oil fields both onshore and offshore, producing millions of barrels of oil every day.
This oil is exported to major economies such as China, Japan, South Korea, India, and countries in Europe. These nations rely heavily on Middle Eastern oil to meet their energy needs.
Because so many countries depend on this supply, any disruption to oil and gas production in the Middle East can quickly affect global energy markets and oil prices.
The Strait of Hormuz: A Critical Route for Global Oil
One of the most important routes for the oil and gas industry is the Strait of Hormuz.
This is a narrow shipping channel between the Persian Gulf and the open ocean. Oil tankers from countries such as Saudi Arabia, the United Arab Emirates, Iraq, and Qatar must pass through this waterway to deliver oil and gas to the rest of the world.
Around 20% of the world’s oil supply passes through this route. That means roughly one out of every five barrels of oil used globally travels through the Strait of Hormuz.
If shipping through this route is disrupted due to conflict, it can slow down global oil and gas production supply chains and push oil prices higher.
Major Oil Exporters in the Middle East
Several Middle Eastern countries are among the largest contributors to global oil and gas production.
The region’s top oil exporters include:
- Saudi Arabia – $187 billion in oil exports
- United Arab Emirates – $114 billion
- Iraq – $98 billion
- Iran – $47 billion (often sold at discounted prices due to sanctions)
- Kuwait – $29 billion
Other significant exporters include:
- Oman – $28.9 billion
- Qatar – $21 billion
These countries operate large offshore platforms, refineries, and oil terminals, making the region a key part of the global oil and gas industry.
Attacks on Oil and Gas Infrastructure
The ongoing conflict has already affected several important energy facilities in the region. These facilities are critical for oil and gas production, refining, and export operations.
Some of the reported targets include:
- Ras Tanura oil refinery in Saudi Arabia, operated by Saudi Aramco
- Ras Laffan LNG facilities in Qatar, operated by QatarEnergy
- Fujairah and Mussafah oil terminals in the UAE
- Fuel storage tanks and a tanker at the Port of Duqm in Oman
- Port of Salalah in Oman
- Israeli offshore gas fields
- Oil fields in Iraqi Kurdistan
- Rumaila oil field in Iraq
Some operations at these facilities have been temporarily halted or disrupted, affecting the flow of oil and gas production to global markets.
Could Oil Prices Reach $150 per Barrel?
Energy experts are closely watching the situation because the conflict could significantly affect oil prices.
In an interview with the Financial Times, Qatar’s Energy Minister Saad Al-Kaabi said that if the conflict continues, energy exporters in the Gulf may have to shut down oil and gas exports within weeks.
If that happens, the global market could see oil prices rise to around $150 per barrel of oil.
Some energy exporters in the region have already issued force majeure notices, meaning they may not be able to meet supply commitments due to circumstances beyond their control.
Rising Shipping and Insurance Costs
The conflict is also affecting how oil is transported around the world.
According to S&P Global, one of the first economic impacts has been a sharp rise in shipping and insurance costs for oil tankers.
Because the Strait of Hormuz is now considered a higher-risk area, insurance companies are charging more to cover ships transporting oil and gas through the region.
Some shipping companies are choosing longer and safer routes, but this increases transport costs and delivery times, which can also push oil prices higher.
Increase of “Shadow Fleet”
Another development in the oil and gas industry is the growing use of a so-called “shadow fleet.”
This refers to oil tankers that operate outside normal regulatory systems. These ships are often used by countries facing sanctions, such as Russia and Iran, to transport oil to global buyers.
According to reports from Reuters, Russia could benefit from the current disruptions because reduced Middle Eastern supply may allow it to sell more crude oil to China and India at higher prices per barrel of oil.
What This Means for the Global Economy
The International Monetary Fund (IMF) has warned that the economic impact of the conflict will depend on several factors, including:
- How long the conflict continues
- Whether oil and gas infrastructure is heavily damaged
- How much oil and gas production is disrupted
- Whether rising oil prices are temporary or long-term
If the conflict continues and offshore oil production and exports remain disrupted, energy costs could increase worldwide.
Why It Matters to Everyone?
Although the conflict is happening in one region, its effects are felt globally.
Higher oil prices increase the cost of fuel, transportation, electricity, and many everyday goods. This means businesses and consumers around the world eventually feel the impact of disruptions to the oil and gas industry.
However, beyond the economic effects, the human cost of war remains the most significant consequence. Lives lost and communities affected remind us that the true impact goes far beyond energy markets.
