Reuters calculations reported on August 25 indicate that conflict affects countries producing more than 43% of the world’s oil supply in 2026. The current supply disruption, which includes the effects of military actions involving Iran, Russia, and Ukraine, has been characterized as the largest on record.
The crisis intensified six months ago following U.S. and Israeli attacks on Iran. This event joined ongoing disruptions from the Russia-Ukraine war, instability in Libya, and U.S. restrictions on Venezuelan oil exports that began earlier this year. Extreme weather, including a winter storm in January that halted 2 million barrels per day (bpd) of U.S. crude output, has further strained global availability.
Current estimates from analysts place the specific disruption in the Persian Gulf at 5 million to 7 million bpd. While Saudi Arabia has re-routed supplies through the Red Sea, risks to these flows persist following July attacks near the Suez Canal and in the Red Sea. Additionally, military strikes on refining infrastructure in Russia and the Middle East have taken approximately 10% of global refining capacity offline.
The scale of the crisis involves approximately 45 million barrels per day of oil production based on 2025 output levels. For perspective, the loss of 10% of global refining capacity means that one out of every ten barrels of crude oil produced cannot be processed into usable gasoline or diesel. While the International Energy Agency (IEA) released record volumes of oil from emergency stockpiles to mitigate the shock, the agency reports that these releases are now mostly finished while global inventories continue to fall.
The situation has caused immediate changes in trade policy, such as Russia’s current ban on gasoline and diesel exports to manage domestic shortages. In the United States, the energy sector remains reliant on domestic production, though judicial and regulatory decisions continue to shift. On August 24, a U.S. judge dismissed a challenge to offshore drilling expansions, while the Environmental Protection Agency (EPA) recently delayed biofuel compliance deadlines, causing ethanol credit prices to fall. Future impacts depend on the duration of active conflicts in the Middle East and Eastern Europe.
Effective dates for many of these shifts are already in place. The U.S. debt crossed the $40 trillion threshold in August, and record diesel prices were documented earlier this month. The IEA has already concluded its primary emergency stock releases, meaning the global market must now operate with declining inventories and ongoing military threats to shipping lanes in the Strait of Hormuz and the Red Sea.