Energy Shock: Can the World Cope Without Gulf Oil and Gas?

Alanbatnews -

Escalating tensions in the Middle East have sent ripples through global energy markets, raising a critical question: Can the world withstand a disruption of oil and gas supplies from the Persian Gulf?

The immediate impact of recent escalations, coupled with attacks and threats linked to Iran targeting ships near the Strait of Hormuz, has been a surge in oil prices. Brent crude jumped 5.87% to $77.15 a barrel, while U.S. crude rose 5.31% to $70.58 a barrel, at the time of reporting.

The Strait of Hormuz is a crucial chokepoint for global oil supplies. The U.S. Energy Information Administration (EIA) reports that in 2024, 20 million barrels of oil and petroleum liquids passed through the strait daily, representing approximately 20% of global consumption.

Critically, alternative routes offer limited relief. Despite existing land infrastructure in Saudi Arabia and the UAE designed to bypass Hormuz, the EIA estimates that only 2.6 million barrels per day can be rerouted in case of a disruption. This is a fraction of the usual flows through the strait.

The situation is even more precarious for liquefied natural gas (LNG). The EIA notes that approximately 20% of global LNG trade passed through the Strait of Hormuz in 2024, with Qatar alone exporting about 9.3 billion cubic feet per day. Any prolonged disruption would severely impact the global LNG market.

The International Energy Agency (IEA) confirms that LNG exports from Qatar and the UAE transit through Hormuz, and viable alternatives for these volumes are scarce.

In 2025, global crude oil production averaged 78.94 million barrels per day, while total petroleum liquids production reached approximately 106.29 million barrels per day. Global natural gas production amounted to 4.26 trillion cubic meters in 2025, nearly matching global consumption of 4.28 trillion cubic meters.

Combined oil production from Iran, Iraq, Bahrain, Saudi Arabia, the UAE, Kuwait, and Oman reached approximately 23.85 million barrels per day in 2025, according to the EIA. This accounts for roughly a quarter of global supply, underscoring the region's significance in OPEC+ spare capacity.

The IEA estimates Middle East gas production at around 775 billion cubic meters in 2025. Data from 2024 shows the following gas production figures for individual countries:

Iran: 262.9 billion cubic meters
Saudi Arabia: 121.5 billion cubic meters
UAE: 61.4 billion cubic meters
Oman: 45.3 billion cubic meters
Bahrain: 16.6 billion cubic meters
Kuwait: 14.9 billion cubic meters
Iraq: 11.9 billion cubic meters

The IEA indicates that gas production in the Middle East grew by about 2.5% in 2025, with Saudi Arabia's production increasing by approximately 6%, while Iran's growth was marginal.

Short-term alternatives include drawing from emergency reserves, with IEA member countries obligated to maintain stocks equivalent to at least 90 days of net imports and to activate a collective response during crises.

Other short-term measures involve demand rationing through reduced industrial consumption, improved energy efficiency, and switching from oil to alternatives where possible. However, these measures often lead to economic slowdown and increased costs.

Redirection of oil and gas shipments is another option, although the LNG market is more sensitive due to supply constraints tied to contracts and liquefaction/regasification capacities. These actions may provide temporary relief but do not create new oil and gas supplies or resolve the fundamental issue of transit through the Strait of Hormuz.

Increasing production requires time, especially in regions outside the Gulf. Investment cycles, drilling, services, and equipment are necessary. The IEA reports that Saudi Arabia holds approximately half of OPEC+ spare capacity, indicating that the potential for increased production is primarily concentrated within the Gulf region.

Alternative pipeline routes to bypass Hormuz are limited, with a capacity of only 2.6 million barrels per day in case of disruption, significantly less than normal Hormuz flows.

Rapidly compensating for LNG losses is not feasible, as building liquefaction plants and expanding export capacity takes years. A substantial portion of Gulf supplies, particularly from Qatar, relies on the Hormuz route itself.