Middle East conflict puts up to 2 million bpd of Gulf refining capacity under threat - Rystad Energy’s Oil Market Update

As the Strait of Hormuz remains closed in the wake of the US-Iran military escalation, Gulf countries' oil inventory levels are reaching maximum capacity, posing serious challenges for regionally based refiners.

This has materially altered our base-case market assessment, published two weeks before the conflict began.
Under the pre-war scenario, we had expected Brent to average $60 per barrel in 2026, as the market faced a substantial surplus of 2.6 million barrels per day (bpd).

Most impacts since the start of the conflict have been precautionary or limited in scope: Mina Al Ahmadi in Kuwait remained operational after debris damage, while Saudi Arabia’s Ras Tanura – already offline for scheduled maintenance that began the last week of January – extended its outage window following drone attacks and a debris-related fire.
The Haifa refinery in Israel shut some units to avoid damage. Iran reported strikes near the Persian Gulf Star/Bandar Abbas port and on facilities in Tehran, while Bahrain’s Sitra saw minor damage.

The most significant operational curtailments were in Qatar, where LNG production ceased at Ras Laffan and Mesaieed.
In the UAE, drones caused a fire at Fujairah storage tanks and ADNOC’s Ruwais complex, although the unit struck has not been disclosed and reports indicate the Ruwais West refinery was taken offline as a precaution, with no injuries.
Duqm in Oman reported no effects.

Bahrain and Kuwait

Refining capacity significantly exceeds domestic product demand and most product exports – about three-fourths of what is produced – rely on shipping through the Strait of Hormuz.
In a scenario where tanker movements remain constrained, these countries could quickly encounter storage limitations for refined products, forcing refiners to halt exports and reduce utilization rates.

Kuwait’s large export-oriented refining system, including the recently commissioned Al Zour complex alongside Mina Al Ahmadi and Mina Abdullah, is particularly exposed due to its heavy reliance on seaborne product exports and the absence of pipeline infrastructure that bypasses the strait.
Bahrain’s Sitra refinery faces similar risks, given the country’s limited domestic demand and strong dependence on export markets to balance output.
However, due to the single refinery presence in the state, Sitra is expected to run at a turndown ratio until product inventories are fulfilled. 

UAE and Qatar
The UAE’s Abu Dhabi Crude Oil Pipeline (ADCOP) allows crude exports to bypass the Strait via Fujairah, but refined products from the Ruwais complex still largely depend on tanker routes that transit Hormuz.
As a result, UAE refineries may still need to adjust product exports or manage inventory build-ups if maritime flows remain restricted.

Qatar’s refining system remains comparatively small, but its export orientation means that prolonged shipping disruptions could still prompt refiners to reduce utilization if product inventories accumulate.
Qatar has a relatively small refining system and limited domestic demand, but lower overall exposure due to the country’s broader energy export focus on LNG rather than refined products.
Nevertheless, any sustained disruption to tanker traffic could prompt refiners to reduce export volumes and adjust utilization rates.

Saudi Arabia
Saudi Arabia exported 6.5 million bpd of crude and 2 million bpd of clean refined products last year.
About 5.7 million bpd of crude and 1 million bpd of product was shipped via Hormuz, mainly from Ras Tanura.
With the Hormuz closure, Saudi Arabia has started redirecting high-volume crude exports to Yanbu on the Red Sea via the East-West pipeline, attempting to bypass the Strait and maintain export flows.
The pipeline has a capacity of roughly 5 million bpd, and loading constraints at Yanbu, estimated at around 4-4.5 million bpd, further limit Saudi Arabia’s ability to redirect flows. As a result, even if pipeline flows are maximized, the Red Sea route cannot fully accommodate the crude volumes normally exported through Hormuz.

While Saudi Arabia can continue supplying its Red Sea refineries at Yanbu, exports of refined products from its Red Sea refining hubs, including Yanbu, Rabigh and Jizan, could increase as producers attempt to shift product flows away from the Gulf.
However, with Yanbu occupied and given priority of crude exports, the port loading capacity of Rabigh and Jizan does not exceed 400,000 bpd combined, meaning Saudi Arabia might have to reduce refinery runs by 10-20% initially if the war is prolonged for more than 4-6 weeks.
As Asia needs increased product supply, exports through Bab el-Mandeb face transport risks from Yemen’s Houthis.
Hence, refineries on the eastern side of Saudi Arabia are at risk of lower runs and shutting down first.