Middle East Oil Disruptions Leave Global Supply at Risk
The current oil shock triggered by the US-Israeli military operation on Iranian territory has followed a familiar script. Wars and political ruptures have long disrupted Middle Eastern oil production, with prices climbing as a result. The International Monetary Fund projects that the current crisis will worsen.
Historically, oil disruptions in the region began with the 1973 embargo, which saw Iran's output plummet from 5.3 million barrels per day (bpd) in 1978 to just 1.48 million bpd by 1980, a 72% drop that pushed it from the world's fourth-largest producer to 15th.
Iraq briefly benefited from this decline, reaching a peak of 3.49 million bpd in 1979 and overtaking Iran. However, the war between the two countries devastated both nations' oil production: Iraqi output fell to 0.91 million bpd by 1981, while Iran's dropped to 1.32 million bpd that same year.
The First Gulf War delivered the most violent shock yet, with Kuwait's oil production plummeting from 2.6 million bdp in 1979 to just 0.18 million bpd in 1991, as its wells were set alight. Iraq's production similarly suffered, falling from 2.84 million bpd in 1989 to a mere 0.29 million bpd in 1991 under invasion and embargo.
Kuwait recovered faster than expected, rebuilding to 1.94 million bdp by 1993 and above 2.1 million bpd by 1995, its damaged fields restored. Iraq's recovery was hampered by UN sanctions, which held output through the mid-1990s, and a further dip came with the 2003 Iraq war.
Iran has faced numerous cycles of international sanctions: US and EU measures in 2011-2012 saw output slump from 4.45 million bpd in 2011 to 3.61 million bpd by 2013; the 2016 nuclear deal lifted it back to 4.94 million bpd by 2017; and the 2018 US withdrawal and 2019 loss of export waivers drove it down to 3.25 million bpd by 2020.