IEA: largest oil supply disruption in history has removed at least 10 million barrels a day
Jillian Ambrose
The International Energy Agency has warned that the war in Iran has cut the region’s oil and gas production by at least 10m barrels of oil a day, as it warns that the conflict is creating “the largest supply disruption in the history of the global oil market”.
The escalating regional conflict has damaged key oil and gas infrastructure and many producers have begun shutting down production as exports via the strait of Hormuz have come to a halt and local storage facilities fill up.
In a new report, the world’s energy watchdog warned that the sharp slump in Middle East production could lead to a global slump in oil production of 8m barrels a day this year even with increased oil production from countries including Russia.
The fall in global oil supplies far exceeds the dent to global oil demand as a result of the war, according to the IEA. It has cut 1m barrels of oil a day from its global oil demand forecasts for this year due to lower refining and air travel in the Middle East.
It says:
double quotation markWith crude and oil product flows through the Strait of Hormuz plunging from around 20 mb/d before the war to a trickle currently, limited capacity available to bypass the crucial waterway, and storage filling up, Gulf countries have cut total oil production by at least 10 mb/d.
In the absence of a rapid resumption of shipping flows, supply losses are set to increase.
The impact of surging energy costs is also expected to weigh on global economic growth, which could cause demand to fall further, but the IEA said it was too soon to say how great the impact might be.
The global oil shortfall is expected to pile pressure on the market which is already reeling. The shut down of the strait of Hormuz, which carries a fifth of the world’s seaborne crude cargoes, has effectively wiped 15m barrels of oil a day to the global market leading to wild swings in market prices.
The Middle East war is creating the largest supply disruption in the history of oil markets
As a result, IEA Members have agreed to release 400 million barrels of emergency oil stocks to support market stability
More in our latest Oil Market Report ➡️ https://t.co/McMLAo4Ovn pic.twitter.com/FKwGwCd6G3
— International Energy Agency (@IEA) March 12, 2026
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Goldman Sachs have cut their forecasts for growth in the UK and the eurozone this year, due to the Middle East conflict.
They now predict the UK economy will grow 1% this year (on a Q4/Q4 basis), down from 1.5% prior to the Iran war.
The eurozone is also forecast to grow by 1% in 2026, a downgrade to 0.4% since the onset of the Iran war.
They have also made more modest growth downgrades to Sweden and Switzerland, and lifted their GDP forecast for Norway slightly.
Photograph: Goldman Sachs
These changes factor in Goldman commodity team’s revised forecast that oil will average $77 a barrel in 2026.
The IEA also admit that yesterday’s emergency release of oil stocks will only be a “stop-gap measure”, if the Middle East conflict isn’t resolved swiftly.
In today’s oil market report they say:
double quotation markThe ultimate impact on oil and gas markets and the broader economy from the conflict will depend not only on the intensity of military attacks and any damage to energy assets, but also, crucially, on the duration of disruptions to shipping through the Strait of Hormuz.
Adequate insurance mechanisms and physical protection for shipping are key to the resumption of flows, which is of paramount importance for the oil market.
ShareIEA: largest oil supply disruption in history has removed at least 10 million barrels a day
Jillian Ambrose
The International Energy Agency has warned that the war in Iran has cut the region’s oil and gas production by at least 10m barrels of oil a day, as it warns that the conflict is creating “the largest supply disruption in the history of the global oil market”.
The escalating regional conflict has damaged key oil and gas infrastructure and many producers have begun shutting down production as exports via the strait of Hormuz have come to a halt and local storage facilities fill up.
In a new report, the world’s energy watchdog warned that the sharp slump in Middle East production could lead to a global slump in oil production of 8m barrels a day this year even with increased oil production from countries including Russia.
The fall in global oil supplies far exceeds the dent to global oil demand as a result of the war, according to the IEA. It has cut 1m barrels of oil a day from its global oil demand forecasts for this year due to lower refining and air travel in the Middle East.
It says:
double quotation markWith crude and oil product flows through the Strait of Hormuz plunging from around 20 mb/d before the war to a trickle currently, limited capacity available to bypass the crucial waterway, and storage filling up, Gulf countries have cut total oil production by at least 10 mb/d.
In the absence of a rapid resumption of shipping flows, supply losses are set to increase.
The impact of surging energy costs is also expected to weigh on global economic growth, which could cause demand to fall further, but the IEA said it was too soon to say how great the impact might be.
The global oil shortfall is expected to pile pressure on the market which is already reeling. The shut down of the strait of Hormuz, which carries a fifth of the world’s seaborne crude cargoes, has effectively wiped 15m barrels of oil a day to the global market leading to wild swings in market prices.
The Middle East war is creating the largest supply disruption in the history of oil markets
As a result, IEA Members have agreed to release 400 million barrels of emergency oil stocks to support market stability
More in our latest Oil Market Report ➡️ https://t.co/McMLAo4Ovn pic.twitter.com/FKwGwCd6G3
— International Energy Agency (@IEA) March 12, 2026
The latest UK real-time economic activity data highlights how energy prices spikes last week.
The Office for National Statistics reports that both electricity and gas prices jumped, saying:
double quotation markWholesale energy prices have increased in response to recent events in the Middle East, with the System Average Price (SAP) of gas increasing by 68% from 2.669 p/kWh to 4.477 p/kWh in the week to 8 March 2026, compared with the previous week; the System Price of electricity increased by 74% from 6.430 p/kWh to 11.170 p/kWh over the same period (National Gas Transmission, Elexon).
Wholesale energy prices have increased in response to recent events in the Middle East. In the week to 8 Mar, compared with the previous week, there were increases in:
· System Average Price of gas (68%)
· System Price of electricity (74%)
Read more ➡️ https://t.co/YydX4E7oQJ pic.twitter.com/wOkXCMaYvt
— Office for National Statistics (ONS) (@ONS) March 12, 2026
ShareUK accountants fear supply chain disruption from Middle East crisis
Phillip Inman
A survey of chartered accountants in the UK and the regions most affected by the Middle East conflict has found that a majority believe their businesses and organisations are vulnerable to supply chain disruptions and higher costs.
In a potentially disturbing re-run of the problems businesses faced at the outset of Russia’s invasion of Ukraine, 56% of nearly 500 ICAEW members polled said they were exposed to the current conflict, while over a quarter (29%) think it’s too early to judge.
The respondents, who tend to be senior staff, including finance directors based in organisations across the world, said higher energy costs and supply chain disruption were “key business concerns”.
Two thirds of UK businesses said they would be affected by higher energy costs (66%) and that government subsidies would be the most effective form of support.
Meanwhile, one of the main analysts of the UK construction sector said the industry needs “to be prepared for the worst” after a 15% year-on-year decline in the number of £100m-plus projects starting on site.
With the sector already in the doldrums, Allan Wilen, economics director at the data provider Glenigan, said:
double quotation mark“From housebuilding to major infrastructure, the shockwaves will be felt as the prospect of lower borrowing costs fade and as operational costs spiral from higher energy costs and reduced access to key structural materials.”
ShareUK mortgage rates rise past 5%
Average mortgage rates in the UK are continuing to climb, as the Middle East conflict drives up borrowing costs.
Hopes of a Bank of England interest rate cut in 2026 have been crushed this week, as oil soared, prompting lenders to reprice their mortgage products quickly.
Data provider Moneyfacts has reported that the average 2-year fixed residential mortgage rate has risen to 5.04%, up from 5.01% yesterday.
Five-year mortgage rates have jumped too, to 5.13%, up from 5.09% on Wednesday.
The City money markets are now indicating there’s a 96% chance that the Bank of England leaves interest rates on hold next Thursday, at its next rate-settting meeting.
They also indicate that the BoE is more likely to have raised rates than cut them by the end of the year.
Tom Bill, head of UK residential research at Knight Frank, says:
double quotation markSpare a thought for anyone sitting on a mortgage pricing committee this week.
The job of setting loan terms must be challenging when the number of rate cuts on the horizon moves around so dramatically in such a short space of time.
The reason is the roller-coaster ride on energy markets since the end of February as the Middle East conflict has unfolded.
ShareRussia ‘pockets €6bn in fossil fuel revenues’ since Iran conflict began
The surge in the oil price since the Iranian conflict began has proved lucrative for Russia, a report today claims.
Urgewald, the environmental and human rights organization, has calculated that Russia has pulled in €6bn in fossil fuel revenues since the war began less than two weeks ago.
Russia is earning €510m a day from fossil fuels, 14 per cent above February levels, they say, following the drop in supplies from the Middle East.
Last week, the US temporarily authorised India to buy oil from Moscow, and hinted that it could lift considering lifting more sanctions on Russian oil.
Alexander Kirk, sanctions campaigner at Urgewald, said:
double quotation mark“That is the reality of fossil fuel geopolitics. When markets panic, authoritarian exporters cash in. In less than two weeks, Russia has earned an estimated €6 billion from fossil fuel exports, money that ultimately feeds the Kremlin’s war machine.
“Easing sanctions now would not stabilise markets. What it would do is allow Russia to sell the same oil for a far better price. US sanctions have forced Russian crude to trade at a steep discount. A rollback closes that gap overnight and hands the Kremlin a revenue boost worth billions, at the very moment that pressure is starting to bite.”
“This is a political choice. Governments can hold the line on sanctions, or they can signal that if energy prices rise high enough, the West will always find a reason to blink. That choice will not just prolong Ukrainian suffering. It will undermine the security of Europe as a whole.”
ShareThe production line of an aluminium maker Photograph: China Daily/Reuters
The aluminium price is rising again today, as traders worry that the Middle East conflict will hit supplies from the region.
On the London Metal Exchange, benchmark three-month aluminium has gained 1.32% to $3,502.50 a ton, near to a four-year high.
Aluminium on the Shanghai Futures Exchange has gained 0.4% today, to 25,240 yuan ($3,669.56) per metric ton.
Neil Welsh, head of metals at brokerage Britannia Global Markets, says:
double quotation markAluminium rose for a third day as the war in the Middle East dragged on, threatening deeper supply disruptions from local producers.
Prices closed at their highest since April 2022 after the conflict forced output cuts at smelters in the region that accounts for about 9% of global output, and the Strait of Hormuz remains effectively shut. Aluminium retains significant upside, with a scope for a move toward $3,700 a ton, BMI, a unit of Fitch Solutions Inc., said in a note.
The spike in premiums in the US and Europe reflects “mounting concern among western buyers,” it added.
ShareGas prices higher
European gas prices are also rising today.
The month-ahead UK gas contract is up 4.2% at 132.6p per them, while the continental European equivalent is 3.2% higher at €51.6 per Megawatt hour.
ShareShell’s CEO banks 60% pay jump
Shell’s CEO, Wael Sawan, has secured a massive jump in pay that should protect him from the inflationary shock facing those of more modest incomes.
Shell’s annual report, released this morning, shows that Sawan’s remuneration jumped to £13.756m in 2025, up from £8.615m in 2024, an increase of 60%.
The increase was driven by a share award, worth more than £9m, which had been awarded in 2023 and has now vested.
A chart showing Shell’s executive pay in 2025 Photograph: ShellShare
European stock markets have opened in the red, weighed down by worries about the oil price.
In London the FTSE 100 share index is down 55 points, or 0.55%, at 10,296 points.
Defence stocks are rising, though, with BAE Systems up 2.3% and Babcock International gaining 2.1%
ShareOn The Beach suspends profit forecast after slowdown following Iran war
Holiday group On The Beach has suspended its profit guidance due to the conflict in the Middle East.
On The Beach told sharehoders this morning that its profitability will be hurt by the crisis, saying:
double quotation markWhilst the Group has limited exposure to destinations in the Middle East, it has experienced a significant slowdown in demand following the onset of conflict in the region, particularly to destinations such as Turkey, Greece, Cyprus and Egypt.
The timing of when the conflict will end and the shape of recovery in demand to these destinations are unknown.
As a result, it has suspended its previous guidance that it would make an adjusted pre-tax profit of between £39m and £43m this financial year.
The latest escalation in the Iran war has hit Asia-Pacific stock markets, with Europe expected to fall at the open too.
In Tokyo, Japan’s Nikkei 225 index has fallen by 1.3% today, as has Australia’s S&P ASX 200 index.
ShareStrait of Hormuz disruption could cause global food price shock
As well as oil, the Iran war is disrupting supplies of fertilisers, which could drive up food prices.
The strait of Hormuz is a key route for fertilisers critical to global agriculture.
Analysts have told CNBC disruptions could feed through to higher farming costs, reduced crop yields and ultimately more expensive food.
Raj Patel, a research professor at the University of Texas, has warned that fertiliser disruptions linked to the conflict could amplify global food pressures through several channels simultaneously.
Patel says:
double quotation mark“The Strait of Hormuz is a fertiliser chokepoint. Qatar, Saudi Arabia, Oman, and Iran together supply a substantial share of the world’s traded urea and phosphates, and virtually all of it transits Hormuz.”
49% of the world’s urea exports pass through the Strait of Hormuz. Urea is the most-used nitrogen fertilizer on Earth. The Haber-Bosch process turns natural gas into ammonia, ammonia into urea, and urea into food. It alone is responsible for feeding ~4 billion people. Half the…
— Gaurab Chakrabarti (@Gaurab) March 12, 2026
Today could be another rough day for global bonds, predicts Kathleen Brooks, research director at XTB, who explains:
double quotation markOil prices remain elevated and bonds remain more sensitive than equities to inflation fears. Interest rate volatility is back, and the futures market is now predicting rate hikes for the UK once more.
The war has also prompted Goldman Sachs to push back its forecast for US Federal Reserve’s rate cuts
It now expects quarter-point reductions in September and December, having previousl forecast cuts would start in June.
ShareGoldman Sachs raises oil price forecasts
Goldman Sachs have raised their forecasts for the price of oil at the end of this year, having concluded that there will be longer disruption to oil flows in the Strait of Hormuz.
The investment bank has raised its forecast for Brent, the international benchmark, in the fourth quarter of 2026 to $71 a barrel, up from $66 a barrel. US crude is now forecast to average $67 in Q4, up from $62, Reuters reports.
Goldman analysts in a note on Thursday said they now assume 21 days of low Strait of Hormuz (SoH) oil flows at 10% of normal levels followed by a 30-day gradual recovery, compared with their earlier expectation of a 10-day disruption.
Brent is expected to average $98/bbl in March and April, but could jump to $110 in an ‘upside risk scenario’ where flows through the strait are disrupted for a month.
Updated at 03.21 EDT
Introduction: Oil crisis risks ‘broader stagflationary shock’ as Brent hits $100 again
Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.
Hopes that the market turmoil in the energy market might have abated are fading rapidly today, as Iran escalates its attacks on infrastructure and transport networks across the Gulf.
The oil price has jumped after two tankers were set ablaze two tankers in Iraqi waters early this morning. The attacks came after senior Iranian officials warned of a long “war of attrition” that would threaten chaos in the global economy.
There are also reports that Oman’s key oil export terminal has been evacuated.
These widespread Iranian attacks on Middle Eastern energy facilities drove Brent crude over the $100 a barrel mark again in early today, hitting $101.59 a barrel; it’s now slipped back to $97.50 a barrel, up 6% today.
The jump in oil prices is fanning fears that the global economy could be tipped into stagflation – the unpleasant combination of rising prices and stagnant growth.
Yesterday’s announcement of the largest release of government reserves in history has not calmed fears of major supply shortages if travel through the strait of Hormuz is not restored.
Jim Reid, market strategist at Deutsche Bank, says investors are facing the risk of a “broader stagflationary shock”:
double quotation markFrom a market perspective, the problem is that investors are increasingly pricing in a more protracted conflict that causes extensive economic damage. After all, with no concrete signs of de-escalation yet, that’s keeping oil prices elevated, and raising the risk of a broader stagflationary shock. Indeed, we know that investors are pricing in the longer scenarios, because the 6-month Brent future is also up +3.06% this morning to $82.97/bbl, and with each passing day it gets harder to argue that the disruption to shipping and energy infrastructure will only prove temporary.
Daniel Casali, chief investment strategist at UK wealth manager Evelyn Partners, warns that geopolitics, rather than fundamentals, are increasingly driving markets, adding:
double quotation markThe conflict is potentially a stagflationary shock the severity of which depends on its length and export volumes while the SoH remains closed.
Oil inventories buy time, but as they erode, risks of higher energy prices, rising inflation and market volatility increase.
The agenda
9am GMT: IEA Oil Market Report
9.30am GMT: Governor of the Bank of England Andrew Bailey giving opening remarks at the Financial Stability Board
11am GMT: Turkey interest rate decision
12.30pm GMT: US weekly jobless claims
Updated at 04.05 EDT