OIL
& GAS JOURNAL
Extensive
damage from the Iran war, estimated at over $25 billion, underscores the
current dependence on the Strait of Hormuz and the need for alternate transport
The
US-Israeli war on Iran has been hugely damaging for Iran and for its
noncombatant Gulf neighbors, which have suffered both widespread attacks and an
inability to export oil and gas at customary levels. A country-by-country
assessment shows these damaging effects are unevenly spread, with one or two
countries seeing windfall revenues while others undergo devastating losses.
The
March 2026 closure of the Strait of Hormuz—triggered by US-Israeli strikes on
Iran—has brought about the largest outage of oil exports in the history of the
oil market, roughly 10% of global supply. The war also triggered shortages of
numerous commodities that affect food supply, metals refining, computer chips,
the medical industry and several others.
For
exporters in the Persian Gulf, the lost revenue from the closure ranges to $2
billion/day, and the cumulative losses for March alone amounted to about 400
million bbl, roughly equal to the planned releases by the International Energy
Agency (IEA) and US government of strategic oil stocks.
The
strait typically handles 20% of global oil exports, a combination of 15 million
b/d of crude and 5 million b/d of refined products. About two-thirds of that
remained trapped inside the Gulf in early April. Faring even worse was LNG,
with a full 20% of global LNG supply of around 86 million tonnes per year (tpy)
unable to depart the Gulf.
Tallying
effects on oil and gas revenues for the month of March on the eight Persian
Gulf states sorts the Gulf countries into two distinct categories, with advantages
and disadvantages based on geographic exposure, availability and capacity of
workarounds, and intensity of bombardment.
The
advantaged (Oman, Saudi Arabia, UAE, Iran)
National
oil companies in some Gulf states either retained access to the strait, had
prepared in advance for the closure by building bypass pipelines, or in one
case, enjoyed favorable geography outside the maritime chokepoint.
Oman
If
there was a "winner" in the Iran war, Oman makes the most plausible
case. Nearly all of Oman’s oil and gas fields, and all its export
infrastructure lie outside the Gulf, far from Hormuz. Oman exported close to 1
million b/d of crude oil in March, up from its normal 0.8 million b/d. A rough
estimate suggests Oman’s export revenue will jump to $3.7 billion in April from
around $1.5 billion in February due to record-high spot prices for Omani crude,
which averaged $122 for the month.
Saudi
Arabia
Saudi
Arabia's longstanding foresight in building the 750-mile-long East-West
Pipeline (Petroline) has paid off. The East-West Pipeline has been transporting
up to 7 million b/d of oil to the Saudi west coast, allowing it to utilize 4 to
5 million b/d of export capacity at Yanbu on the Red Sea. As throughput and
exports ramped up toward the end of March, the kingdom was able to attain
roughly 70% of its pre-war export levels.
Higher
oil prices are expected to more than offset volume losses, with April earnings
potentially reaching $18 billion. However, Saudi Red Sea exports also depended
on non-interference from the Yemeni Houthi, since most of the cargoes were
shipping to Asia through the Houthi-supervised Bab al-Mandeb Strait.
Iran-aligned Houthi have since late 2023 demonstrated their ability to block
the Bab al-Mandeb. Doing so again would whittle down Saudi exports even
further, forcing Saudi cargoes to exit the Red Sea by the capacity-constraining
Suez Canal and SUMED Pipeline.
United
Arab Emirates
The
United Arab Emirates (UAE) has been availing its ADCOP Pipeline to bypass the
strait. ADCOP can transport up to 1.8 million b/d to the Fujairah export
terminal on the Gulf of Oman. However, this bypass route has been subject to
Iranian drone attacks that have repeatedly interrupted loading. It is not clear
exactly how much oil was loaded during March, although some industry estimates
point to around 1.4 million b/d, about half the UAE’s February loadings of 3
million b/d.
If
Fujairah exports remained consistent at 1.8 million b/d then the UAE would be
in a similar position to Saudi Arabia, exporting about two thirds of pre-war
volumes. That could mean higher prevailing oil prices potentially offsetting
revenue losses from reduced volumes. Abu Dhabi is also an LNG exporter. Its
typical exports of around 6 million tpy have no bypass route. No LNG cargoes
have exited the Gulf since end-February.
Iraq
Exports
plummeted from 3.6 million b/d to a paltry 0.2 million (or 0.3 million if truck
exports to Syria and Jordan are tallied). Revenues dropped to $1.9 billion in
March from $7 billion in February and will fall further in April. Iraq’s only
outlet was to the Turkish Mediterranean coast via a once robust pipeline now
beset by maintenance problems, capacity constraints, and transit risks across
Iraqi Kurdistan and Turkey. Shutting in most Iraqi oil production also cost
Iraq dearly in lost associated gas, which brought about widespread domestic
power outages.
Qatar
The
world’s No. 3 gas exporter lost nearly all oil and LNG export capacity. Monthly
revenue of $6 billion has effectively vanished, leaving only about 2 bcfd of
natural gas exports to the UAE and Oman via the Dolphin Pipeline. This gas
sells below market prices, reaping revenue of just $125–200 million/month.
Kuwait
Normally
exporting 2 million b/d worth roughly $4 billion in an average month, Kuwait's
export revenue would have plummeted to near zero by end-March, although fiscal
buffers and sovereign wealth fund holdings remained substantial.
Bahrain
The
tiny island kingdom faced a total loss of its 100,000 b/d of refined product
exports. With foreign exchange reserves covering only 2 months of imports,
Bahrain faced fiscal crisis and the potential for pressure on its currency peg
with the US dollar.