The decision by US President Donald Trump to launch strikes against Iran introduces new risks to a significant portion of global oil supplies. Iran itself produces approximately 3.3 million barrels of crude oil per day, accounting for 3% of global output and ranking as the fourth-largest producer within OPEC. However, due to its strategic geographic position, the country's influence on worldwide energy supplies extends far beyond its own production.
Iran is situated along the Strait of Hormuz, a crucial transit route for crude oil from major suppliers, including Saudi Arabia and Iraq. This strait handles about one-fifth of global crude shipments. While the waterway currently remains open, shipping tracking data indicates that following the attacks, some tankers are avoiding passage through the strait, leading to a buildup of vessels on both sides of its entrance.
Oil markets were closed over the weekend, so there is no initial information on whether the strikes against Iran and any potential retaliatory actions within the region involve energy infrastructure. Below are key risk factors for oil markets to monitor as the situation develops.
**Iranian Production** Iran currently produces roughly 3.3 million barrels of crude per day, a significant increase from the under 2 million barrels per day in 2020, despite ongoing international sanctions. The country has become more adept at circumventing these restrictions, with around 90% of its oil exports going to China.
Iran's largest oil fields include Ahvaz, Marun, and the West Karun group, all located in Khuzestan Province. Its main refinery, built in 1912 in Abadan, has a processing capacity exceeding 500,000 barrels per day. Other significant refineries include Bandar Abbas and the Persian Gulf Star refinery, which process crude and condensate—an ultra-light oil abundant in Iran. The capital, Tehran, also has its own refinery.
For exports, the Kharg Island terminal in the northern Persian Gulf serves as Iran's most critical logistics hub. Semi-official Iranian news agency Mehr reported explosions on the island on Saturday but provided no further details or mention of damage to oil terminal facilities.
Kharg Island features multiple loading berths, jetties, remote mooring points, and storage capacity for tens of millions of barrels of crude. In recent years, these facilities have handled export volumes of over 2 million barrels per day.
Earlier this month, Iran rapidly loaded tankers at Kharg Island, likely aiming to move as much crude offshore as possible and direct vessels away from potential danger zones amid rising risks of facility attacks. This approach resembles measures taken last June before strikes by Israel and the US.
An attack on Kharg Island would deliver a severe blow to Iran's economy.
**Regional Risks** Iran's Supreme Leader warned on February 1 that a US attack on the country would trigger a "regional war." Tehran has also claimed it has the capability to fully close the Strait of Hormuz.
While an extreme measure never actually implemented by Iran, a closure of the strait remains a nightmare scenario for global markets. The Strait of Hormuz is a vital chokepoint for most crude exports from the Persian Gulf, as well as for shipments of refined products like diesel and jet fuel. Qatar, one of the world's largest liquefied natural gas exporters, also relies on the strait for energy transport. Following the latest round of regional attacks, ship-tracking data shows at least three LNG carriers traveling to or from Qatar have paused their voyages.
Although OPEC members Saudi Arabia and the UAE have some capacity to reroute crude via pipelines bypassing the Strait of Hormuz, a closure would still severely impact exports and drive up crude oil prices.
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