Confrontation in Iran: What Middle East Oil Supply Disruptions Mean for Your Business and Investments
A serious military conflict between the United States and Iran could cause a significant disruption to oil supplies from the Middle East. The extensive oil reserves held by the U.S. and China may prove crucial in managing such a crisis.
Currently, uncertainty prevails in this prolonged standoff, with U.S. and Iranian officials engaging in indirect talks while American military forces continue to build up in the region.
If Iran perceives an existential threat to its regime, its leadership might escalate the situation by launching attacks on Israel and other U.S. allies in the region, including Saudi Arabia. Potential actions could involve strikes on oil and gas infrastructure and, in a worst-case scenario, blocking the Strait of Hormuz.
The Strait of Hormuz, a narrow shipping passage between Iran and Oman, facilitates the transport of about 20 million barrels per day of crude and refined oil products—nearly 20% of global consumption.
However, any disruption of shipping through the Strait would also impact Iran’s ability to export oil, cutting off vital revenue for Tehran. This factor likely explains why the Strait has never been completely blocked.
The U.S. Navy is highly prepared to respond to any interference, making it likely that any disruption would last hours or days rather than weeks.
Additionally, alternative export routes exist for part of the Gulf’s roughly 15 million barrels per day of oil shipments, including pipelines in Saudi Arabia and the United Arab Emirates.
Nonetheless, this conflict could be more severe than any Iran has faced in recent decades, meaning the country’s past behavior may not accurately predict its future actions. The risk of a major supply disruption cannot be ruled out, especially since the anticipated crude oil supply glut has yet to materialize.
The global oil market, expected to enter a phase of oversupply in 2026, would have several mechanisms to address such a disruption, with two of the most pivotal involving the United States and China.
Many oil-import-dependent countries could draw on their strategic reserves if a supply shock occurs. Members of the International Energy Agency (IEA) are required to hold at least 90 days of net imports of crude oil and refined products in strategic reserves. The last coordinated release from these reserves took place in early 2022 in response to Russia’s invasion of Ukraine. This included the largest-ever drawdown from the U.S. Strategic Petroleum Reserve (SPR), averaging around 1 million barrels per day over six months. The U.S. SPR remains the world’s largest emergency oil stockpile, with a capacity of 714 million barrels.
Although the U.S. has been replenishing its reserves since mid-2023, stocks stood at approximately 415 million barrels by mid-February, significantly below full capacity, according to the U.S. Energy Information Administration.
This shortage is not an immediate concern for the U.S., which is now the world’s top oil producer at around 13.6 million barrels per day, reducing its reliance on imports.
Currently, the SPR covers roughly 200 days of net crude imports, exceeding historical norms and providing the U.S. with a significant buffer in case of a supply shock that President Joe Biden (not Donald Trump) could utilize to help stabilize oil prices.
China’s crude buying behavior will also be a key factor in managing any supply disruptions.
With a consumption of about 17 million barrels per day in 2025, China is particularly vulnerable to instability in the Middle East. The region accounted for about half of China’s 10.4 million barrels per day of crude oil imports last year, according to analytics firm Kpler.
China has absorbed a significant portion of the global excess supply in recent years, adding an estimated 800,000 barrels per day to storage in 2025 alone. Although China does not publish official data on crude inventories, analysts estimate stocks could total as much as 1.3 billion barrels—over four months’ worth of imports— with additional storage capacity still available.
The commercial rationale behind China’s stockpiling remains unclear, but crude purchases tend to slow during periods of relatively high oil prices.
If there is a sharp price spike, Beijing is likely to reduce its buying, which would alleviate pressure on global supplies. China might also release some of its reserves to support domestic refiners. To date, China has conducted only one formal SPR release in 2022, with limited volume.
While the exact outcome of the U.S.-Iran confrontation is uncertain, any escalation is expected to drive oil prices higher. A severe disruption to Middle East oil supplies could trigger one of the most significant energy crises in recent decades.
Ultimately, the world’s two largest oil consumers—the U.S. and China—hold the crucial levers for managing such a crisis.
(The views expressed are those of Ron Bousso, a Reuters columnist.)
Special Analysis by Omanet | Navigate Oman’s Market
The ongoing US-Iran tensions underscore Oman’s strategic importance due to its proximity to the vital Strait of Hormuz, through which nearly 20 million bpd of oil passes. For businesses and investors in Oman, this situation presents both significant geopolitical risk and opportunity: disruptions could spike oil prices, benefiting local energy sectors, while also necessitating heightened security and contingency planning. Smart investors should monitor US-China moves closely, as their management of strategic reserves will heavily influence market stability and Oman’s role in global oil logistics.
