Oil under fire: Nearly half of global oil supply comes from conflict-hit countries

The world’s oil market is entering an unusually vulnerable phase. Wars, attacks on energy infrastructure and disruptions to key shipping routes are now affecting countries that together account for more than two-fifths of global oil production.

Countries affected by conflicts in Iran, Russia-Ukraine and Libya, along with US restrictions on Venezuelan oil exports, produced about 45 million barrels per day (bpd) in 2025. That was more than 43 per cent of global oil supply, according to Reuters calculations based on International Energy Agency data.

The figure underlines how deeply geopolitics has become intertwined with the global energy market in 2026. This is not a case of all 45 million bpd being lost from the market. Rather, production and refining capacity in these countries has been disrupted at different points this year. But the concentration of supply in conflict-affected regions has left the market with less room for error.

Iran war puts Gulf oil flows under strain

The biggest disruption has come from the war involving Iran.

Six months after US and Israeli attacks on Iran triggered the conflict, there is still no clear end to the crisis. The fighting has disrupted oil production, refining and transportation across the Gulf.

The Strait of Hormuz remains the biggest concern.

The waterway is a crucial route for oil exports from the Gulf. With shipping through the strait severely constrained, analysts estimate that the current disruption to Gulf oil flows is around 5 million to 7 million bpd.

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Saudi Arabia has rerouted some oil through the Red Sea, while Gulf exporters have sought alternative ways of moving crude.

But alternative routes cannot completely remove the risk.

Attacks in the Red Sea and near Egypt’s Suez Canal in recent months have shown how quickly risks can spread beyond the immediate conflict zone.

For oil-importing countries, that creates a double problem: the availability of crude and the ability to transport it.

Ukraine takes aim at Russia’s oil industry

Russia’s oil industry is facing a different kind of pressure.

Ukraine has intensified attacks on Russian energy infrastructure, targeting refineries and other oil facilities. Some strikes have taken place thousands of kilometres from Ukrainian-held territory.

The attacks have reduced Russia’s refining capacity and contributed to fuel shortages.

Moscow has responded by restricting gasoline and diesel exports, tightening supplies in international fuel markets.

The impact is not confined to Russia. Kazakhstan, a major regional oil producer, has also faced production and refining disruptions this year.

The combined effect of the Gulf and Ukraine conflicts has been significant. Global refining capacity has fallen by about one-tenth, according to Reuters.

That is particularly important for consumers because crude oil is only one part of the energy equation. Even when crude is available, a shortage of refineries can push up the price of gasoline, diesel and other petroleum products.

Libya and Venezuela add another layer of risk

The pressure on global supplies does not end with Iran and Russia.

Libya’s prolonged instability continues to threaten its oil production and exports. Venezuela has also faced US restrictions on its oil exports, reducing another source of supply to international markets.

These disruptions have not necessarily happened simultaneously. The global oil market has continued to receive supplies from other producers, preventing a complete supply collapse. But the simultaneous presence of multiple risks has made the system considerably more fragile.

The concern is that another major disruption could occur before the market has fully recovered from the previous one.

US oil becomes increasingly important

The disruptions have increased the importance of US oil to global markets.

American producers have helped compensate for supply losses elsewhere, giving consumers and refiners an alternative source of crude.

But US supply is not immune to disruption.

Severe winter weather earlier this year temporarily knocked around 2 million bpd of US crude production offline.

That episode was a reminder that even countries outside the main conflict zones face risks from extreme weather and infrastructure problems.

For global oil consumers, therefore, diversification does not mean eliminating risk. It means spreading it.

Refining is becoming the bigger problem

One of the less visible consequences of the current crisis is the damage to refining capacity.

Crude oil must be processed into products such as petrol, diesel and jet fuel before it can be used by most consumers and businesses.

The wars in Iran and Ukraine have together taken a significant amount of refining capacity out of operation.

Russia’s fuel shortages are a clear example.

Ukraine’s attacks on Russian refineries have reduced domestic fuel availability, prompting Moscow to restrict exports. That has tightened fuel markets beyond Russia.

Diesel prices in the US have also climbed to record levels despite refiners operating at high capacity.

This shows why the impact of the oil crisis is being felt at petrol pumps and in freight markets, rather than only in crude oil trading.

Oil shock becomes an inflation problem

Higher fuel prices are beginning to feed into the wider economy.

Diesel is particularly important because it powers trucks, ships, construction equipment and agricultural machinery. A sustained increase in diesel prices can therefore raise the cost of moving goods and producing them.

That eventually reaches consumers.

For central banks, this creates a difficult problem. If energy prices push inflation higher, interest rates may have to remain elevated for longer than otherwise expected.

The impact can extend to government finances as well.

Higher borrowing costs combined with expensive energy can increase pressure on countries already carrying large debt burdens.

Emergency reserves provide only temporary relief

The International Energy Agency has released record volumes of oil from emergency stockpiles to cushion the supply shock.

Those releases have provided an important buffer.

But much of the emergency response is now largely complete, while global inventories continue to fall.

That leaves the market with a smaller safety net if another major disruption occurs.

Strategic reserves can bridge a temporary gap. They cannot replace lost production for an extended period.

That is why the next few months could be crucial for the global oil market.

Why this crisis is different

Oil markets have experienced major shocks before.

The oil crises of the 1970s, the Gulf War and other conflicts caused sharp disruptions to global supplies and prices.

What makes the current situation different is the breadth of the risks.

Iran threatens supplies from the Gulf. Ukraine is targeting Russia’s energy infrastructure. Libya remains politically unstable. Venezuelan exports face restrictions. Critical shipping routes such as the Strait of Hormuz and the Red Sea remain vulnerable.

At the same time, extreme weather can disrupt production in countries that are not directly involved in these conflicts.

The result is an oil market where a large share of global production is exposed to some form of geopolitical or physical risk.

For oil-importing economies, the implications are significant.

A prolonged rise in crude and fuel prices can increase import bills, widen trade deficits, put pressure on currencies and add to inflation.

India and other major oil-importing economies are particularly sensitive to such movements because changes in international crude prices quickly feed into the broader cost of transportation and production.

The immediate crisis, therefore, is not simply about how many barrels of oil the world is losing.

It is about how much spare capacity remains when the next disruption comes.

With countries accounting for more than 43 per cent of global oil supply now affected by conflict or major restrictions, the margin for another shock is becoming increasingly narrow.