Iran’s central role in the global oil ecosystem is back in sharp focus as escalating tensions with Israel push crude oil prices to their highest levels since September 2023. Brent crude futures surged to $76.74 per barrel on Wednesday, while West Texas Intermediate traded at $73 per barrel by 11:30 PM IST.
The spike in prices is driven by fears that the intensifying conflict could disrupt oil flows through the Strait of Hormuz — a maritime chokepoint critical to global energy markets. Iran, a key oil producer in the region, has long threatened to block the Strait if provoked. Even a temporary disruption could send shockwaves across global supply chains.
Roughly one in every four barrels of global oil — including exports from Saudi Arabia, the UAE, Kuwait, Iraq, and Iran itself — passes through the Strait of Hormuz. This narrow waterway also serves as the primary route for much of the world’s spare production capacity, amplifying the potential global impact of any blockade or military activity.
Recent reports of two tankers catching fire near the Strait, later confirmed as a result of a collision, have only deepened market unease. The incident underscores the region’s vulnerability to disruptions, both accidental and intentional.
According to the International Energy Agency (IEA), Iran currently produces around 4.8 million barrels per day (mb/d) of crude oil, condensates, and natural gas liquids (NGLs), and exports about 2.6 mb/d. Despite stepped-up US sanctions, its crude and condensate exports have held steady at approximately 1.7 mb/d this year, with the bulk going to China.
Iran is also a major player in the oil products market, shipping nearly 800,000 barrels per day of fuel oil, LPG, and naphtha since January 2025. Any disruption in Iranian output — whether from military strikes or operational shutdowns — has a direct and immediate bearing on global prices.
The IEA confirmed that Iran has partially suspended operations at the South Pars gas field, the world’s largest, following an Israeli airstrike-induced fire. It’s unclear whether output from Phase 14, which includes 75,000 barrels per day of condensate and comparable volumes of ethane and LPG, has been impacted.
Additionally, the Shahran oil depot and refinery near Tehran were reportedly targeted, although initial assessments suggest no significant damage. Meanwhile, Israel has preemptively shut down over 60% of its natural gas production, including the offshore Leviathan field, citing security concerns. Iranian strikes have also reportedly damaged infrastructure at Israel’s Haifa refinery.
As the region inches closer to a broader confrontation, oil markets remain on edge. For now, flows from Iran remain stable, but with every escalation, the risk premium on crude prices climbs — a stark reminder of why Iran’s geopolitical position and energy exports are so crucial to global stability.