Middle East oil producers gain from higher prices as Hormuz Strait closure disrupts global oil flows

Geopolitical tensions in the Middle East have sharply disrupted energy flows through the Hormuz Strait, creating a split outcome for oil-exporting countries depending on their geography and export routes. After US and Israeli air strikes on Iran in late February, Iran effectively blockaded the strait, a key transit corridor for about one-fifth of global oil and LNG. Although Tehran allowed some vessels not linked to the US or Israel to pass, overall traffic remained severely disrupted.

Hormuz disruption tightens global supply

Iran controls traffic through the strait and signaled it could charge transit fees, continuing to benefit from the crisis even as flows are constrained. With global supply already tight, Brent crude surged about 60% in March, marking the largest monthly rise on record.

US President Donald Trump warned of continued pressure on Iran unless a deal is reached by April 7 and traffic through Hormuz is restored. While many countries face inflationary pressures and higher energy costs, the impact on Gulf producers is not uniform.

Different export routes shape country outcomes

Even with Iran controlling Hormuz, Oman, Saudi Arabia, and the United Arab Emirates can partially avoid bottlenecks through pipelines and ports outside the immediate area. By contrast, Iraq, Kuwait, and Qatar have fewer alternatives, leaving crude oil stranded and harder to reach international markets.

Following Trump’s latest threats, an Iranian official said Tehran would not reopen Hormuz in exchange for a temporary ceasefire and rejected the ultimatums, adding that it would not yield under pressure. Neil Quilliam of Chatham House told Reuters that once Hormuz is closed, it could happen again and again, posing a major threat to the global economy.

IEA: largest energy-supply shock on record

The International Energy Agency (IEA) said the conflict has caused the largest energy-supply shock on record. About 12 million barrels per day of Middle East oil has been disrupted, and around 40 energy facilities have been damaged.

Reuters analysis, using March export data from Kpler and the Joint Opendatasets (JODI), shows large year-on-year declines for some exporters. Iraq’s and Kuwait’s oil exports in March fell about 75% year on year. In contrast, Iran’s exports rose 37% and Oman’s increased 26%.

Export volumes and revenue impacts

Saudi Arabia’s crude exports in March fell 26% year on year to 4.39 million barrels per day, but the export value remained about $558 million higher than a year earlier due to higher prices. The UAE’s oil export value fell by about $174 million year on year.

Reuters said the figures are based on export volumes tracked by Kpler and JODI and are multiplied by Brent prices to compare with the previous year. The analysis uses Brent as a simplification, even though other regional oils are priced higher.

Saudi Arabia’s pipeline reduces reliance on Hormuz

Saudi Arabia’s position is supported by the 1,200-km East–West pipeline, built in the 1980s to reduce reliance on Hormuz. The route connects eastern Saudi oil fields to Yanbu port on the Red Sea, with a current capacity of 7 million barrels per day. Aramco uses about 2 million barrels per day domestically, leaving roughly 5 million barrels per day available for export.

Kpler data show Yanbu’s loading averaged 4.6 million barrels per day in the week starting March 23, near capacity, despite the pipeline hub being attacked on March 19. In March, Saudi crude exports declined 26% year on year to 4.39 million barrels per day, yet export value was still higher by about $558 million due to prices.

Oman and the UAE also benefit from alternative routes

Oman, Saudi Arabia, and the UAE benefit partly from the Habshan–Fujairah pipeline, which has capacity of 1.5–1.8 million barrels per day and allows oil to be transported without passing through Hormuz. Even so, the UAE’s export value in March still fell by roughly $174 million year on year.

Iraq and Kuwait face the steepest revenue declines

Among Gulf producers, Iraq suffered the steepest revenue decline in March, down 76% to $1.73 billion, while Kuwait fell 73% to $864 million. Reuters reported that Iraq and Kuwait are likely to see further declines in April, as March revenue was supported by shipments dispatched before the conflict escalated.

Last week, Gulf governments reportedly had fiscal levers such as using accumulated reserves or issuing bonds. Excluding Bahrain, Gulf states retain fiscal space with debt levels around 45% of GDP, though the long-term impact remains highly uncertain.

Calls for investment shift amid energy transition debate

Some oil majors and Western politicians are calling for increased investment in fossil fuels to reduce future supply disruptions. Others argue that renewable energy offers a more resilient economic path.

Last week, TotalEnergies and Masdar announced a $2.2 billion joint venture to promote renewable energy deployment across nine Asian countries, a move that signals the crisis could accelerate a shift away from oil.

Energy crisis developments may also contribute to a broader move toward energy transition and diversification of energy sources.