The Middle East conflict has already removed 1 billion barrels of crude oil from global markets in just three months — equivalent to nearly two-and-a-half times the entire US Strategic Petroleum Reserve — with cumulative losses projected to approach 2 billion barrels by the end of the year even under a relatively optimistic recovery scenario, according to Rystad Energy.
The disruption has shut in 11.8 million barrels per day (bpd) of production across six Gulf producers, making it the most severe oil supply disruption of the modern era, the consultancy said, warning that every additional month of conflict could erase another 350 million barrels from global supply.
“Cumulative losses have now reached 1 billion barrels and are on track to nearly double by year-end under our base case,” said Aditya Saraswat, MENA Research Director at Rystad Energy.
“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,” he added.
The assessment comes as Brent crude hovers around $90 per barrel, with hopes of a diplomatic breakthrough fading amid renewed military exchanges between Iran and Israel.
According to Rystad, crude output across six Gulf producers has collapsed from 24.2 million bpd before the conflict to 12.4 million bpd currently. Saudi Arabia accounts for the largest share of disrupted supply at 3.8 million bpd, followed by Iraq at 2.8 million bpd and Kuwait at 2 million bpd. Together, the three countries account for nearly 75% of total shut-in volumes.
The disruption has severely hit regional economies. Iraq’s oil export revenues plunged to $1 billion in April from $6.8 billion in February, with May revenues expected to decline further as exports remain constrained.
Shipping through the Strait of Hormuz also remains far below normal levels. Vessel traffic has fallen from around 120 vessels a day before the conflict to less than 20% of pre-war levels, despite multiple ceasefires and diplomatic efforts. LNG shipments have virtually disappeared, falling from around five vessels a day to near zero, leaving Gulf gas exporters exposed to prolonged market disruption.
Alternative export routes have provided only partial relief. Combined crude loadings from Saudi Arabia’s Yanbu and the UAE’s Fujairah terminals rose from below 2 million bpd before the conflict to above 6 million bpd in April and briefly reached 7.2 million bpd in early May. However, flows have since fallen back to around 4.7 million bpd following infrastructure damage, insurance constraints and vessel congestion.
“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.
Rystad’s base case assumes a limited US-Iran agreement in June and a phased reopening of Hormuz from mid-July. Even then, only 10-15% of shut-in production is expected to return in July, with around 85% of lost supply restored by October and full recovery stretching into January 2027.
The consultancy warned that even under this constructive scenario, global markets remain on track to lose nearly 2 billion barrels of supply this year, keeping energy markets vulnerable to further price spikes and volatility.
