Global market grapples with 1 billion barrels of lost crude supply since war with Iran began – Rystad Energy market note

Shut-ins concentrated in Saudi Arabia, Iraq and Kuwait

Total pre-conflict supply across the six Gulf producers stood at 24.2 million bpd in January 2026; current output has fallen to 12.4 million bpd.

Saudi Arabia accounts for the largest single share of lost barrels at 3.8 million bpd (32% of total shut-ins), followed by Iraq at 2.8 million bpd and Kuwait at 2 million bpd.

Those three countries together represent nearly three-quarters of all shut-in volumes. Iraq is particularly exposed: its large southern fields depend almost entirely on seaborne export through the strait, and northern pipeline alternatives to Turkey's Ceyhan terminal remain limited.

Iraq’s oil revenues have collapsed as a result. April export receipts totaled just $1 billion, down from $6.8 billion in February, with May expected to fall further.

By contrast, Saudi Arabia’s oil export revenue reached approximately $24.6 billion in March 2026 , the highest since 2022, as elevated oil prices offset the volume losses enabled by its East-West Pipeline bypass to Yanbu.

Hormuz traffic stuck well below pre-conflict levels

The recovery in Strait of Hormuz vessel movements remains far weaker than diplomatic headlines suggest.

Traffic collapsed from a 27 February baseline of roughly 120 vessels per day to just 5–10 per day through March.

Even after ceasefires and multiple rounds of talks, April and May transits have largely remained below 20% of pre-conflict levels.

LNG transit has effectively disappeared, from around five vessels per day before the conflict to near zero, keeping Qatar and other Gulf LNG exporters fully exposed.

Crude and oil-product tankers have similarly not normalized, with the pre-conflict run rate of nearly 30 tankers per day reduced to a handful on most days.

Bypass routes cushion the shock but cannot replace Hormuz

Saudi Arabia’s Yanbu and the UAE’s Fujairah have served as the primary release valves for Gulf crude, with combined international loadings rising from below 2 million bpd in mid-February to above 6 million bpd by early April and briefly peaking near 7.2 million bpd in early May.

The surge has since reversed: a 4 May attack damaged terminal infrastructure at Fujairah, limiting power availability and insurance coverage for vessels calling there, while Yanbu faces vessel-availability constraints, loading-window congestion and Houthi interdiction risk in the Red Sea.

Combined bypass flows had fallen back toward 4.7 million bpd by late May.

ADNOC has fast-tracked an expansion of the ADCOP pipeline connecting onshore fields to Fujairah, raising nameplate capacity from 1.8 million bpd to 3.3 million bpd.

However, the pipeline carries only Murban crude from onshore production; ADNOC’s offshore grades, which make up a material portion of total UAE output, will require further infrastructure to reach Fujairah for export.

US blockade squeezes Iranian exports and China supply

Iranian loadings averaged 1.64 million bpd in March, the last full month before the US implemented a blockade of Iranian ports on 13 April.

Exports dropped to 1.34 million bpd in April and are set to fall below 500,000 bpd in May. The US military’s Central Command reports the blockade has prevented 107 vessels from entering or leaving Iranian ports as of 27 May.

China’s imports of Iranian crude have fallen by more than 500,000 bpd in April to around 1.1 million bpd. Iran holds an estimated 150–160 million barrels of oil on water that is for now keeping Chinese refiners supplied and Tehran’s revenue stream intact, but that buffer is finite.

Full normalization slips to January 2027 under base case

Rystad Energy’s base case continues to assume a narrow US-Iran agreement in June, leading to a phased Hormuz reopening from mid-July.

Even on that path, the upstream recovery follows an S-curve rather than a snapback. Tanker repositioning is the first bottleneck, pushing the initial production recovery two to three weeks behind the strait’s reopening, with July supply recovering just 10–15% of shut-in volumes.

A stronger rebound is expected in August and September, with regional supply rising to roughly 17.3 million bpd and 20.9 million bpd respectively.

Around 85% of lost volumes are expected to be restored by October, with the remaining recovery, dominated by mature fields in Iraq and Kuwait, extending into January 2027. Cumulative supply losses are on track to reach nearly 2 billion barrels by year-end, even under this relatively constructive scenario.