Escalating Wars Threaten Global Oil Supplies
The ongoing wars in Iran and Ukraine are causing oil shortages to escalate, threatening global markets. 6.5 million barrels a day of refining capacity have been compromised due to physical damage from attacks by Iran and its proxies. Saudi crude oil and refined petroleum product exports are hindered by attacks on shipping through the Hormuz and Bab el-Mandeb straits.
The conflict is also affecting Russia's fuel-making capability, with over 11 major Russian refining complexes being successfully bombed by Ukrainian drones. Estimates suggest that between 30% to 60% of Russia's refining capacity has been knocked out, limiting military fuel supplies and war funding from exports of refined products.
The closure of the Strait of Hormuz has cut off the flow of about 20% of the world's supply of liquefied petroleum gas, affecting countries such as India and China. People in India were having trouble finding and affording cooking gas as far back as April 2026, forcing them to skip meals.
However, some countries are showing resilience in the face of global energy disruptions. China has reduced its imports of crude oil and petroleum-related products by about 3.6 million barrels per day, while Brazil's government-owned oil company Petrobras is operating refineries at full capacity, offering some relief to markets in the Americas.