Every time there is tension in the Middle East, we read that Iran will close the Strait of Hormuz. It is important to remind readers that Iran has never actually shut down the strait. It has threatened to do so many times but has never followed through. Moreover, a closure of the Strait of Hormuz would primarily hurt China, as about 76% of traffic through it goes to the Asian giant, with less than 4% going to the United States and around 7% to the European Union.
China is one of the few key partners of the Iranian regime, purchasing close to 90% of Iran’s exports. A shutdown would therefore damage China the most, which is precisely why it is unlikely to happen. Oil exports via the Strait of Hormuz by country also show that one of the largest negative impacts would be on Iran itself, which ships around 2.3 million barrels per day of crude and products through this route.
The impact on the oil market of the Iranian attacks may be significant but short‑lived, as seen on previous occasions. The geopolitical risk premium in oil prices may rise, but the risk of a major supply shock is limited. Iran’s oil production is currently about 3.3 million barrels per day, but it exports only 1.5 million barrels per day and, as noted, almost all of it goes to China. The rest of the OPEC+ members can offset any disruption in Iranian production quickly. In addition, most of Iran’s crude output is onshore (around 86%) and concentrated in the southwest, in Khuzestan and near the Iraqi border. The impact of the recent attacks on these production facilities has been very limited, and the regime will try to maximize export revenues to finance the war.
Saudi Arabia alone produces around 10 million barrels per day and has pledged to increase output to a three‑year high. Its spare capacity is roughly 2 million barrels per day. Total OPEC+ spare capacity exceeds Iran’s entire oil production. Russia can also ship more oil to China if there is any disruption, pushing its production above 10 million barrels per day and exports above 4.5 million barrels per day.
Non‑OPEC supply is also ample. US production is close to all-time highs at around 13.8 million barrels per day, higher than Russia’s or Saudi Arabia’s output, with total non‑OPEC production expected to reach about 66 million barrels per day in 2026. In terms of demand coverage, the OPEC+ strategy remains to provide sufficient supply and offset any risk coming from an escalation involving Iran. OPEC+ is not targeting very high oil prices, aware that such a strategy could backfire and damage long‑term demand. The group wants to show customers that it is the most reliable and competitive supplier, and Saudi Arabia can still claim its role as the “world’s central bank of oil.”
Iran is unlikely to see a major boost in revenues from higher oil prices. Its exports are sold at a significant discount to the Chinese market. A recent OPEC report points to an average 2025 price for Iran’s heavy crude of around 70 dollars per barrel under long-term contracts, with limited upside from moves in spot prices.
Global supply remains elevated, and this, together with strong non-OPEC output, may limit the scale of any oil price shock. In its October 2025 Oil Market Report, the IEA highlighted a surplus close to 4 million barrels per day in 2026, the largest in its historical series, with global supply exceeding 106 million barrels per day and demand growing slowly. With the latest revisions in February 2026, and after some production cuts due to sanctions and weather‑related disruptions, the IEA still projects a surplus “close to 4 mb/d” for the year, with supply growing by about 2.5 million barrels per day compared with an increase in demand of around 0.9 million barrels per day.
The attacks have also shown that the Iranian regime is a major threat to its Arab neighbors and to the rest of the world. The International Atomic Energy Agency strongly stated that Iran is not following its nuclear non-proliferation commitments, saying that the “complete lack of cooperation and transparency makes it impossible for the IAEA to confirm that Iran’s program is only for peaceful purposes.” The Arab League issued a statement condemning “in the strongest terms” the attacks on Qatar, Bahrain, Kuwait, the UAE, Jordan, and Saudi Arabia, explicitly declaring that it will support “any measures they take to defend themselves and protect their people.”
The death toll from recent protests in Iran has risen to more than 30,000, according to independent medical organizations, and the regime maintains an internet blackout while it carries out a widespread campaign of terror.
Any supply shutdown’s impact on China, along with the response of Arab neighbors, is likely to limit the scale of an oil price shock, and OPEC+ will try to calm markets with announcements of higher supply. However, these elements may not be enough to prevent an increase in energy prices driven by a higher geopolitical risk premium. The magnitude of that move will largely depend on how long it takes for military tensions to de‑escalate. The impact may be short‑lived, but it could still be significant.