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Informist, Tuesday, Feb. 24, 2026

MUMBAI – The supply volumes that could be lost, at least temporarily, in the event of a US military strike on Iran would lead to a tightening of the global oil market. However, these outages could be offset by increased production in other member states of the Organization of the Petroleum Exporting Countries, according to Commerzbank AG. Saudi Arabia, Iraq, and the United Arab Emirates in particular have sufficient spare production capacity, Carsten Fritsch, commodity analyst at the German bank, said in a report Tuesday.

In addition, the oil market is currently oversupplied, although the resulting buffer is likely to be not quite as high as it appeared at the beginning of the year due to production outages in various countries such as Kazakhstan and Russia, Fritsch said.

However, the greatest risk of a US attack on Iran lies in the possible blockade of the shipping route through the Strait of Hormuz. "Iran already closed the strait for several hours during military drills last week. It would not even require a complete closure. It would be enough if the waterway were no longer safe for oil tankers to pass through due to the elevated risk during the military operations," Fritsch said.

A good 20 million barrels, or around a quarter of the world's seaborne oil shipments, are transported through the Strait of Hormuz every day, Fritsch said, citing the US Energy Information Administration. "Such a quantity could not be offset by drawing on spare production capacity, especially since this would also be cut off from the oil market if the strait were blocked," he added.

Depending on the duration of the disruption to shipping, this would lead to a noticeable tightening of oil supplies and a sharp decline in inventories. Crude oil prices would then rise significantly. "According to a calculation by Bloomberg, the price increase could be four times the percentage decline in supply," Fritsch said.

Iran recently produced around 3.2 million-3.4 million barrels per day of crude oil. Including condensates, oil production is estimated at 5 million barrels per day, around 5% of global production. Iran's crude oil exports stood at 1.6 million barrels per day in January and as high as 1.8 million-1.9 million barrels per day in autumn 2025, the analyst said, citing Bloomberg data.

The oil market has begun to price in the risk of an escalation in the US-Iran conflict and the associated risks to supply over the last three weeks. Brent crude oil prices have risen by around 10% since the start of this month to just over $72 per barrel, the highest level in around seven months. "Most of the recent price increase is due to a widening risk premium... the price is thus well above the fair price of oil which could be explained by fundamental factors alone," Fritsch said.

At 1756 IST, the most-active May contract of Brent Crude on the Intercontinental Exchange was down 0.1% at $71.03 per barrel and the most-active April contract of West Texas Intermediate Crude on NYMEX was steady at $66.29 per barrel.  End

US$1 = INR 90.95

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Ashutosh Pati

Edited by Rajeev Pai

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