Middle East geopolitical earthquake and its aftershocks on global energy markets

Editor's note: Liu Xu is an executive director of the Center for International Energy and Environment Strategy Studies at Renmin University of China. The article reflects the author's opinions and not necessarily those of CGTN.

The ongoing military conflict in the Middle East, particularly the US-Israeli strikes on Iran and the subsequent de facto blockade of the Strait of Hormuz, has triggered the most severe disruption to global energy supplies in history.

IEA's assessment: Market in unprecedented crisis

The International Energy Agency's (IEA) April 2026 oil market report paints a dire picture of a global energy system under extreme duress. 

According to the report, global oil supply plummeted by a staggering 10.1 million barrels per day in March, representing roughly 10% of total global supply. 

The IEA characterized this as "the greatest disruption in history," exceeding even the 1973 oil embargo and the 1979 Iranian revolution in its immediate impact. Consequently, global oil inventories fell by 85 million barrels in March alone. 

Outside the Middle East, stocks were drawn down by a massive 205 million barrels as flows through the strait were choked off.

The price reaction was swift and brutal. Brent crude futures posted their largest-ever monthly gain in March, rising 63% ($46) to hover around $100 per barrel, while physical crude prices briefly neared $150 per barrel for some grades. 

The IEA noted that global oil demand, which had been growing for years, is now projected to decline by 80,000 barrels per day in 2026 – the first contraction since 2020. 

Demand destruction is most acute in Asia and the Middle East, particularly for naphtha, LPG (liquefied petroleum gas) and jet fuel, as petrochemical plants shut down and flights are canceled. 

The IEA warned that even under a best-case scenario where supplies resume by midyear, they will not return to pre-conflict levels.

US blockade of Strait of Hormuz: Double-edged sword

On April 14, the United States imposed a naval blockade on vessels entering or departing Iranian ports and coastal areas, aiming to squeeze Tehran's economy. 

While ostensibly targeting Iran, this blockade fundamentally alters the global energy landscape. 

Prior to the US action, Iran itself had been controlling the strait since early March, allowing passage only to "friendly nations" in exchange for payments. 

The US blockade now adds a second layer of restriction, creating a near-total paralysis of the world's most critical chokepoint.

The immediate effect has been to solidify and extend supply losses. 

The IEA reported that as of early April, shipments through the strait averaged only 3.8 million barrels per day, compared to over 20 million barrels per day before the crisis. 

Alternative routes – pipelines from Saudi Arabia's west coast, the UAE's Fujairah and the Iraq-Turkey pipeline – have increased exports to 7.2 million barrels per day from less than 4 million barrels per day. 

However, the net loss remains over 13 million barrels per day. 

The US blockade also risks unintended consequences. Refiners in Asia, already desperate for replacement barrels, now face a shrinking pool of suppliers. 

The IEA cautions that global energy markets and economies must prepare for significant disruptions in the months to come, as it remains unclear whether the US blockade will lead to a ceasefire or escalation.

Paradoxical winners and losers: Iran and Russia

Ironically, the first month of the war proved highly profitable for both Iran and Russia, despite their sanctioned status. 

According to an analysis by the Centre for Research on Energy and Clean Air, Russia's oil export revenues jumped 94% month on month in March, reaching $508 million per day. 

The price of Russian Urals crude averaged $94.50 per barrel in March, up 67% from February and climbed further to $120 in April.  

This windfall occurred because the US temporarily suspended Russian oil sanctions for 30 days to inject more supply into a constrained market. 

The sanctions relief allowed stranded Russian cargoes – approximately 6.8 million metric tonnes worth $2.7 billion – to find buyers. 

India's state-owned refineries increased purchases of Russian crude by 148% in March.

Iran similarly benefited. 

Despite the war, Iran exported 1.84 million barrels per day in March – higher than its 2025 average – and earned nearly $5 billion in oil revenues over one month, a 40% increase from pre-war levels. 

Iran controlled the strait and collected tolls while continuing its own exports. 

However, the US blockade now directly threatens this revenue stream. Most of Iran's floating oil – about 157.7 million barrels – is now at risk.