On February 28, the United States and Israel launched a military strike against Iran. Iran subsequently blocked the Strait of Hormuz, cutting off 20 million barrels of oil passing through the Strait daily. Three weeks later, on March 23, IEA Director General Fatih Birol presented a figure at the Australian National Press Club: the war had caused a daily loss of 11 million barrels of global oil supply.
This figure exceeds the combined losses from the 1973 oil embargo and the 1979 Iranian Revolution.
More than 40 energy infrastructure sites in nine Middle Eastern countries have been damaged to varying degrees. IEA data from the same period shows that global natural gas supply losses reached 140 billion cubic meters, nearly double the 75 billion cubic meters of gas losses in Europe during the Russia-Ukraine conflict. In just three weeks, the quantitative impact of this conflict on the energy market has already surpassed the entire impact of the 1970s.
But the supply loss is only half the story. The other half is that there are clear beneficiaries in this crisis.
Putin's unexpected gain
Before the Iran-Iraq War, Urals crude oil traded for less than $60 a barrel. This price was locked for nearly three years, a direct result of Western sanctions. After the outbreak of the Russia-Ukraine War, the US and Europe imposed a price ceiling on Russian oil, and Urals crude maintained a discount of $30 to $40 between itself and the international benchmark Brent crude for a long period. This discount was the most direct signal that the sanctions were taking effect.
The Iran war changed everything. The blockade of the Strait of Hormuz created a huge gap in the global oil market, forcing buyers to seek alternative supplies. According to data from the Center for Energy and Clean Air Research (CREA), Russia's total fossil fuel export revenue reached €7.7 billion in the first two weeks of March, averaging €513 million per day, an 8.7% increase from €472 million in February. Of this, oil exports averaged €372 million per day, resulting in an additional €672 million (approximately $777 million) in revenue over the two weeks.
Urals crude oil surged from less than $60 to around $90 in three weeks, an increase of nearly 80%. According to Al Jazeera, energy analyst George Voloshin pointed out that Brent crude also rose from around $65 to over $110 during the same period, but the key is not the absolute price, but the price difference between the two. The discount between Urals and Brent has narrowed significantly from around $40 before the war. The Moscow Times reported on March 16 that Urals crude delivered to India briefly traded at a premium to Brent, something that hadn't happened since the sanctions took effect.
In other words, a significant portion of the economic wall that the West built with three years of sanctions was torn down by the three-week war with Iran.
On March 12, the Trump administration announced a 30-day sanctions waiver allowing countries to purchase Russian oil en route. Treasury Secretary Scott Bessent stated that this move would release approximately 140 million barrels of supply. However, analysts generally believe that the waiver's condition of "not providing significant financial benefits" is virtually unenforceable. Simultaneously, the IEA announced the release of 400 million barrels from its strategic petroleum reserves, the largest release in history. This waiver will expire on April 11, at which point the market will face a new round of uncertainty.
India is the most direct actor. CREA data shows that in the first two weeks of March, India purchased a total of €1.3 billion worth of Russian fossil fuels, averaging €89 million per day, a 48% increase from the daily average of €60 million in February. Al Jazeera confirmed that at least seven oil tankers originally bound for China diverted their routes to India, with one of them, the Aqua Titan, arriving at an Indian port on March 21. While the world is anxious about oil prices, oil trade between Moscow and New Delhi is accelerating.
Who's paying the bill?
Both supply-side losses and supply-side gains will ultimately be passed on to consumers. American consumers are the most direct beneficiaries.
AAA data shows that the national average price of gasoline in the United States rose from $2.98 before the war to $3.96 on March 23, an increase of 33%. The average price in California has reached $5.56, while Kansas has the lowest at $3.23. The average price of diesel is $5.07, the highest since 2022.
Fortune reports that this round of oil price increases has just wiped out the tax refunds that American households had just received.
The airline industry was among the first to feel the impact. Platts' assessment data shows that U.S. jet fuel prices rose by more than 60% in three weeks, doubling in some areas. United Airlines became the first major U.S. airline to officially announce capacity cuts. CEO Scott Kirby stated in an internal memo that the company was preparing for oil prices to reach $175 a barrel, which would mean an increase in annual fuel costs of approximately $11 billion, more than double the company's "best year ever" profit. United will cut 5% of its flights in the second and third quarters.
The impact is spreading globally. According to a CNBC report on March 21, Delta Air Lines also warned of potential capacity reductions. Euronews reports that Qantas, Scandinavian Airlines, and Thai Airways have already raised prices, and Air New Zealand has cancelled more than 1,000 flights.
Even the gig economy has been affected. According to a March 23 report by the Philadelphia Inquirer, DoorDash has begun offering drivers a weekly gas subsidy of $5 to $15 and a 10% cashback on fuel to address the reduced order volume caused by rising gas prices. When a food delivery platform has to foot the bill for Middle East wars, the length of the impact chain becomes self-evident.
In the three weeks since the Iran war began, the world has lost 11 million barrels of oil per day. Russia has earned nearly $800 million more in 15 days, and the price of oil for American consumers has increased by a third. This chain of events will continue to extend after the sanctions waivers expire on April 11.
