Oil chaos deepens as Gulf producers cut output amid Iran war shock
Oil markets plunge into chaos as Gulf producers cut output and Hormuz shipping halts, pushing crude prices near $100 and shaking global energy and food costs.
The global oil market is entering a new phase of turmoil as the war involving Iran, the United States and Israel disrupts production and shipping across the Persian Gulf. As of March 8, 2026, major oil exporters including the United Arab Emirates, Kuwait and Iraq have begun cutting crude output, while tanker traffic avoids the Strait of Hormuz, pushing prices toward the critical $100 per barrel threshold.
The disruption, now in its ninth day, is rapidly reshaping global energy markets. The Strait of Hormuz - the most important oil transit chokepoint in the world - normally handles about 20% of global crude shipments, but shipping through the narrow waterway has nearly stopped as security risks escalate.
As tankers avoid the region, oil storage facilities across the Gulf are filling up, forcing producers to slow pumping. Iraq's production has already fallen about 60%, dropping to roughly 1.7-1.8 million barrels per day from about 4.3 million barrels before the conflict, according to market estimates.
The United Arab Emirates and Kuwait have also begun reducing output, and analysts warn other producers could soon follow if shipping disruptions continue.
The immediate market reaction has been dramatic. Brent crude surged about 30% last week, marking its largest weekly jump in six years, and bringing global prices within reach of the psychologically important $100 per barrel level.
Some regional crude benchmarks have already crossed that threshold.
Futures tied to Abu Dhabi's Murban crude closed at about $103 per barrel, while Oman crude futures reached $107. In Asia, Chinese crude futures traded around $109, reflecting the intense pressure on energy markets.
According to Stefano Grasso, senior portfolio manager at Singapore-based fund 8VantEdge, the war is pushing oil markets into uncharted territory.
"Every additional day of disruption adds pressure, and in that scenario there is effectively no ceiling to prices in the short term," he warned.
The surge comes after U.S. and Israeli forces launched strikes on Iran on February 28, triggering a widening conflict across the region. Iranian leaders have vowed to continue resisting the attacks, while U.S. President Donald Trump said operations would continue until Iran's military capabilities collapse.
Beyond shipping disruptions, analysts are increasingly worried about direct threats to oil infrastructure across the Middle East.
Saudi Arabia recently intercepted drones targeting the massive Shaybah oil field, which produces about 1 million barrels per day, while attacks and explosions have been reported in Bahrain, Qatar and Iran.
These risks raise the possibility that energy disruptions could last longer than the current conflict phase, potentially tightening global oil supply for months.
To ease pressure on supply chains, Saudi Arabia has begun diverting record volumes of crude to its Red Sea export terminals, bypassing the Strait of Hormuz.
Shipments from the kingdom's western ports have surged to about 2.3 million barrels per day this month, roughly 50% higher than any monthly flow from those terminals since 2016.
However, the diversion only partially offsets the disruption. Saudi Arabia normally exports around 6 million barrels per day through the Persian Gulf, meaning the alternative route can replace only a portion of the lost capacity.
The consequences of the crisis are already spreading across global energy markets.
In Europe, jet fuel prices have soared to a record $1,528 per tonne, equivalent to more than $190 per barrel, driven partly by supply disruptions through Hormuz, which normally handles about half of the European Union's jet fuel imports.
Meanwhile, Asia - heavily dependent on Middle Eastern oil - is feeling the most immediate pressure.
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Japan, which imports more than 90% of its crude from the region, is considering tapping strategic oil reserves.
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China has begun curbing fuel exports to stabilize domestic supply.
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South Korea is reportedly considering reintroducing fuel price caps for the first time in three decades.
Officials have also discussed additional options, including releasing oil from the U.S. Strategic Petroleum Reserve or facilitating alternative supply flows.
U.S. Energy Secretary Chris Wright said the current surge reflects a "fear premium" that may fade once markets adjust.
"This disruption will likely last weeks rather than months in the worst-case scenario," Wright said.
Still, shipping companies remain reluctant to return to the region without naval escorts or a ceasefire, meaning the world's most important energy corridor could remain largely blocked.
For global economies already struggling with inflation, the surge in oil prices could have far-reaching consequences.
Higher energy costs typically translate into rising transportation, fertilizer and food prices, making the conflict increasingly relevant for global agriculture and food supply chains.
If the disruption lasts several weeks - as some analysts expect - the war could mark one of the largest energy market shocks since the early stages of the Ukraine conflict, reinforcing how geopolitical tensions continue to reshape the global commodities landscape.
