Oil Shock Looms as US-Iran War Continues to Disrupt Global Supplies

The US-Iran war has led to a significant disruption in global oil supplies, but crude prices have largely remained stable. However, experts warn that this may not last long, and the global economy, including India, may soon face an oil shock.

According to the US Energy Information Administration (EIA), it will take until early 2027 for oil production and trade patterns to return to pre-conflict status. The EIA also forecasts that oil prices will remain elevated until global oil flows return to normal and inventories are replenished.

In its August outlook, the EIA estimated a 4% fall in global oil supply this year, with a loss of 4.3 million barrels per day. To mitigate this, the International Energy Agency (IEA) released 400 million barrels of oil from member countries' reserves in March, the largest coordinated release in history.

Experts warn that while global oil inventories remain substantial, only a portion is readily available to offset a major supply disruption. Pankaj Srivastava, Senior Vice President at Rystad Energy, notes that countries are unlikely to release large volumes of their own inventories for export if it would compromise domestic energy security.