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West Asia Conflict Erases 1 Billion Barrels of Oil, Losses May Hit 2 Billion By Year-End
The West Asia conflict has already removed 1 billion barrels of crude oil from global markets in three months, equivalent to 2.5 times the US strategic petroleum reserve. Cumulative losses are projected to reach 2 billion barrels by year-end.
Supply Disruption and Economic Impact
The conflict in West Asia has already removed 1 billion barrels of crude oil from global markets within three months. This volume is equivalent to two-and-a-half times the entire US strategic petroleum reserve. Cumulative losses are projected to reach 2 billion barrels by year-end, even under a relatively optimistic recovery scenario, according to Rystad Energy.
The conflict 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 warns that every additional month of conflict could erase another 350 million barrels from global supply.
Crude output across these 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, these three countries account for nearly 75% of total shut-in volumes.
The disruption has severely impacted regional economies. Iraq's oil export revenues plunged to $1 billion in April from $6.8 billion in February. May revenues are expected to decline further as exports remain constrained.
Market Dynamics and Outlook
Brent crude hovers around $90 per barrel, with hopes of a diplomatic breakthrough fading amid renewed military exchanges between Iran and Israel. Market participants are pricing in longer restart timelines.
Shipping through the Strait of Hormuz 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. LNG shipments have fallen from around five vessels a day to near zero, leaving Gulf gas exporters exposed to prolonged 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. 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.
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