The escalating conflict in the Middle East is triggering what could become the largest oil supply disruption in modern market history, according to the International Energy Agency (IEA), as tanker traffic through the Strait of Hormuz collapses and Gulf producers are forced to slash output.

Read also: Hormuz Closure Sends Container Shipping Diversions Surging 360%

In its March 2026 Oil Market Report released Thursday, the agency said crude and refined product flows through the strategic waterway have fallen dramatically—from about 20 million barrels per day (mb/d) before the outbreak of hostilities to only minimal volumes today.

The sudden drop has forced oil producers across the Persian Gulf to curb production as storage tanks fill and export routes remain largely inaccessible.

Massive Supply Curtailments

The IEA estimates that at least 10 mb/d of oil supply has already been curtailed, including roughly 8 mb/d of crude and 2 mb/d of condensates and natural gas liquids. Producers are struggling to move cargoes to market as shipping activity in the region grinds to a halt.

“The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” the agency warned.

The crisis centers on the near-total collapse of tanker movements through the Strait of Hormuz, the narrow maritime corridor that normally handles around one-fifth of global oil trade.

Security threats, repeated attacks on merchant vessels, and soaring war-risk insurance premiums have made the route increasingly untenable for shipowners.

As a result, major producers including Saudi Arabia, Iraq, Kuwait, the United Arab Emirates, and Qatar have begun sharply cutting output as export terminals struggle to load cargo.

The agency now projects global oil supply could fall by around 8 mb/d in March, though some of the losses may be partially offset by increased output from countries such as Kazakhstan and Russia following earlier disruptions.

Refining Sector Disruptions

The turmoil is also hitting refining operations across the Gulf.

More than 3 mb/d of refining capacity has already gone offline due to security threats, direct attacks, or the lack of export outlets as tanker movements stall.

Before the crisis, Gulf producers exported about 3.3 mb/d of refined petroleum products and 1.5 mb/d of liquefied petroleum gas (LPG)—flows that are now largely frozen.

The IEA warned that diesel and jet fuel markets could face particularly severe shortages if refinery outages continue. Meanwhile, limited LPG supplies and petrochemical feedstocks are already forcing some industrial facilities to reduce output.

Record Emergency Oil Release

In response, IEA member countries agreed on March 11 to release 400 million barrels of oil from emergency reserves, marking the largest coordinated stock release ever organized by the agency.

The United States will account for a significant portion of the move, releasing 172 million barrels from the Strategic Petroleum Reserve (SPR) starting next week. The drawdown is expected to take roughly 120 days to complete.

Global oil inventories currently total about 8.2 billion barrels, their highest level since early 2021. Roughly half of these stocks are held in OECD countries, including approximately 1.25 billion barrels in government strategic reserves.

While the emergency release is intended to cushion immediate market disruptions, the IEA cautioned that it will only provide a temporary buffer if shipping through the Strait of Hormuz remains blocked.

Oil Prices Surge

Oil markets have been highly volatile since United States and Israel launched airstrikes on Iran on February 28, sparking a widening regional conflict and a series of attacks on commercial vessels.

Brent crude prices briefly surged toward $120 per barrel before retreating to around $92, still roughly $20 higher than pre-conflict levels. On March 12, Brent settled at $98.21 per barrel, up 6.77% in a single day.

Fuel markets—including diesel, jet fuel, and LPG—have experienced even sharper spikes as refinery outages and export disruptions tighten supply.

Demand Outlook Weakens

While supply losses dominate the market outlook, the conflict is also weighing on global oil demand.

The IEA estimates that widespread flight cancellations across the Middle East and disruptions to LPG supply chains will reduce global oil consumption by roughly 1 mb/d during March and April.

As a result, the agency has trimmed its 2026 global oil demand growth forecast to 640,000 barrels per day, down 210,000 b/d from its previous projection.

Shipping Remains the Critical Factor

Despite the unprecedented emergency stock release, the IEA said the trajectory of global oil markets will largely depend on whether commercial shipping can safely resume operations through the Strait of Hormuz.

“Adequate insurance mechanisms and physical protection for shipping are key to the resumption of flows,” the agency said.

Until maritime traffic can return to normal, the world’s most critical oil transit route remains effectively paralyzed—leaving global energy markets exposed to what could become the most severe supply shock in modern oil market history.

An increasing number of corporations are voluntarily disclosing their scope 3 emissions, which encompass indirect greenhouse gas emissions from a company’s supply chain, according to a report from Supply Chain Dive. The quality of this data remains a challenge, yet large firms are pursuing deeper decarbonization efforts across their value chains.

Read also: Don’t Let New Emissions Rules Eat Your Freight Capacity

Renewable Energy as a Primary Lever

At a recent sustainable business conference, executives from several multinationals detailed their strategies. Mars, a food and confectionery company, employs a comprehensive method to track emissions across the entire lifecycle of its products. This includes upstream activities like agriculture and packaging, as well as downstream distribution and consumer use. The company reported a reduction in supply chain emissions compared to a 2015 baseline and initiated a program to accelerate renewable energy adoption within its value chain. A company executive noted that decarbonizing electricity is often the most straightforward step, and described a program where the firm purchases renewable energy certificates for its suppliers.

For Meta, a significant portion of its supply chain emissions originates from constructing and operating data centers. The technology conglomerate, which has a net-zero goal for 2030, invested in clean energy and low-carbon technologies. The company adjusted its accounting methodology to align with Greenhouse Gas Protocol standards while also incorporating market-based mechanisms. Meta also collaborated on a guide for other firms seeking to decarbonize supply chains through direct procurement of clean energy attributes. The company assists suppliers in procuring renewable energy and is exploring the use of low-carbon building materials, having tested mass timber in data centers.

Divergent Strategies for Different Supply Chains

Other companies highlighted the need for tailored approaches. Patagonia, an outdoor apparel company, has set a net-zero target for 2040 with an interim goal to reduce its scope 3 emissions by a specific percentage compared to a 2017 baseline. The vast majority of its indirect emissions stem from purchased goods and services, particularly raw materials manufacturing. The company uses a combination of industry indexes, lifecycle data, and supplier information to understand its footprint. A key challenge is encouraging suppliers to invest in upgrades without long-term purchase commitments. In response, Patagonia has fully financed energy efficiency improvements for select suppliers and is determining how to account for the resulting carbon reductions.

LOreal’s North American operations present a distinct emissions profile. A significant portion comes from raw materials and packaging, while a notable share is attributed to its digital media footprint, including activities like advertising photoshoots. The beauty company is engaging with industry groups to develop sector standards and has worked internally with marketing teams to identify decarbonization measures that also streamline workflows, such as reducing requests for multiple content iterations.

Source: IndexBox Market Intelligence Platform  

The effective shutdown of the Strait of Hormuz is sending shockwaves through global container supply chains, with new data showing a sharp rise in cargo diversions as shipping lines reroute vessels away from the Persian Gulf.

Read also: Container Shipping Rates Rise as Asian Exports Recover, Hormuz Tensions Add Uncertainty

According to supply chain visibility firm project44, container shipment diversions have surged more than 360% since the strait was effectively closed following the escalation of hostilities involving the United States, Israel, and Iran in late February.

Daily diversions have jumped from a baseline average of 218 shipments to roughly 1,010 per day. The disruption peaked on March 5, when 2,363 shipment diversions were recorded in a single day—the highest level observed in the region.

Located between Iran and Oman, the Strait of Hormuz is a narrow 21-mile passage connecting the Persian Gulf to the Arabian Sea. While it is widely known as a critical route for global energy shipments—handling roughly a quarter of seaborne oil trade—it also plays a vital role in container shipping serving major Gulf ports.

With vessels unable or unwilling to transit the corridor, carriers have begun rerouting cargo to alternative regional hubs that can be accessed without entering the Gulf.

Tracking data from project44 shows that the largest share of diverted shipments was originally destined for ports such as Abu Dhabi, Jebel Ali Port in Dubai, and Hamad Port in Qatar. A significant portion of that cargo is now being redirected to Khor Fakkan Port on the United Arab Emirates’ east coast, which sits outside the Persian Gulf and remains accessible without transiting the strait.

Other ports absorbing diverted cargo include Port of Sohar in Oman, Port of Hambantota in Sri Lanka, and major Indian gateways such as Mundra Port and Navi Mumbai Port.

The sudden rerouting of cargo is already placing significant pressure on receiving ports. According to project44, India’s key container hubs are experiencing growing schedule disruptions as carriers adjust routes and rebuild shipping schedules.

At Mundra, departure delays have increased by 72%—or roughly 11 days—while arrival delays have climbed 27%, reaching up to 49 days. Meanwhile, Navi Mumbai has seen departure delays rise 118%, adding about 13 days, while arrival delays have increased 16%, or roughly 22 days.

The situation differs sharply from the Red Sea shipping crisis, when carriers were able to bypass attacks near Yemen by rerouting vessels around the Cape of Good Hope.

In the case of Hormuz, however, there is no comparable alternate route. Several major Gulf ports—including Jebel Ali, one of the world’s busiest container hubs—are effectively cut off when the strait is closed, forcing carriers to divert cargo to alternative ports or delay shipments entirely.

According to project44, the disruption represents the largest coordinated rerouting response by container shipping lines since the Red Sea crisis, with carriers pausing bookings, staging vessels in safer waters, and restructuring schedules around accessible regional ports.

Although diversion volumes have begun to ease slightly after the early-March peak, analysts warn that congestion, longer container dwell times, and further schedule disruptions are likely as receiving ports struggle to handle the sudden influx of cargo.

With war-risk insurance premiums rising and security conditions in the region still uncertain, shipping lines currently have no clear timeline for resuming normal transits through the Strait of Hormuz. As a result, the disruption could continue to ripple across global container supply chains in the weeks ahead.