The Iran War's First 90 Days Upended Energy Markets

The global oil and LNG markets have transitioned from a year of oversupply into the worst supply disruption in history. The first 90 days of the Iran war have fundamentally reconfigured energy pricing and trade routes, erasing 1 billion barrels of crude oil supply.

The scale of the disruption is centered on the collapse of the Strait of Hormuz. Traffic through this chokepoint, which handles 20% of global oil and LNG supply, collapsed by about 90%. This closure forced Middle Eastern producers to curtail upstream output as storage spaces filled. The impact on production is massive: more than 10 million barrels per day (bpd) of crude were wiped off global daily production volumes. This volume of lost production is too large for any supply increase from other regions to offset.

The disruption extends deep into the natural gas sector. Qatar halted LNG production as early as March 2, and the company later advised that its LNG export capacity may not return to pre-war levels for up to five years due to damage from Iranian missile strikes on the Ras Laffan complex. With LNG volumes from Qatar and the United Arab Emirates (UAE) trapped, the structural deficit in gas is becoming a long-term reality.

The data tracks a rapid depletion of global buffers. As of May 22, cumulative crude and condensate supply losses in the Middle East had reached 961 million barrels, with the 1 billion mark breached by the end of May. This loss of supply is driving inventories to decline at an increasingly faster pace, including in the United States. While production shut-ins have inched higher—with another 100,000 bpd likely to have gone offline in the past week due to pressure in Iraq and Saudi Arabia—the market is losing the ability to absorb shocks.

This is a shift from volatility to a structural supply crisis. Oil and gas prices have found a new, much higher floor and continue to whip with violent volatility nearly every day. As global crude and fuel inventories crash, the market faces the risk of exhausting the buffers that prevent prices from soaring to $150 and beyond.

The era of cheap, abundant energy is facing a direct confrontation with geopolitical reality. For energy-dependent economies, the question is no longer about price fluctuations, but about the fundamental availability of supply.

Watch the inventory levels in the United States and Asia; the speed of their decline will dictate how quickly the market hits the next breaking point.