Energy in Wartime: How the Iran War Reshaped Oil, Gas and Fuel Markets in 2026

How big was the supply shock?

The war began on 28 February, when the United States and Israel struck Iran. Within days the Strait of Hormuz, which normally carries about a fifth of the world's seaborne oil, was effectively closed ^[1]. In its May report the International Energy Agency (IEA) called it "an unprecedented supply shock". More than 14 million barrels a day of Gulf oil was shut in, and cumulative losses already exceeded 1 billion barrels ^[2].

Global oil supply fell to 95.1 million b/d in April, 12.8 million b/d below February ^[2]. The IEA expected demand to fall in 2026 as high prices, economic weakness and fuel-saving measures took hold, with petrochemicals and aviation hit hardest ^[2].

The gap was met from stocks. Observed global inventories fell by 250 million barrels over March and April alone, about 4 million barrels a day ^[3]. Between February and August the total draw reached 507 million barrels ^[4]. That draw is why the market remains sensitive today, even with supply improving.

Oil prices: from $72 to a war premium and back

Brent settled at $72.48 a barrel on 27 February, before the war ^[5]. It peaked at $118.35 on 31 March, fell to $71.57 during the July ceasefire and rose above $100 again when fighting resumed ^[6]. Dated Brent, the physical benchmark, briefly traded as high as $144 in April ^[2].

The latest move has been down. Brent fell 8.7% on 4 November to $94.62, its lowest close since 31 August, as traders bet that a Democratic Congress would push Washington towards diplomacy ^[7]. Gulf exports had recovered to about 17.1 million b/d in October, and JPMorgan estimated that the market moved into a surplus of about 1.4 million b/d that month ^[7]. Our December price forecast sets out the outlook from here.

Europe's gas shock

For Europe, the gas market has been the harder blow. Qatar's LNG stopped reaching Europe in May, and the EU will also ban Russian LNG from January 2027 ^[8]. The TTF benchmark rose from about €28 per megawatt-hour in January to €97.64 in late October, the highest since December 2022 ^[8].

Storage could not be refilled. EU sites were 74.6% full in late October, against 82.9% a year earlier and 98.5% in 2023 ^[8]. Qatar damaged 17% of its export capacity and expects repairs to take several years; Gulf LNG exports averaged 33% of pre-war levels in October ^[9]. According to the EU energy regulator ACER, the conflict added an estimated €18 billion to €33 billion to Europe's gas import bill ^[10].

The outlook for the rest of the winter depends largely on the weather. The Institute for Energy Economics and Financial Analysis (IEEFA) estimates that the EU may need to use about 7% less gas than last winter, a figure that includes the Russian LNG ban ^[8]. Wood Mackenzie expects storage to fall to around 17–20% by the end of March, assuming a normal winter and a return of Qatari and Emirati LNG early in 2027 ^[8]. A colder winter would mean lower stocks and higher prices, as Europe outbids Asia for spare cargoes ^[8].

Diesel and the refined products squeeze

Refined products have been tighter than crude throughout. The IEA warned in May that stress was spreading from crude into fuels, with middle distillate margins at historically high levels ^[2]. In the EU, consumer diesel prices rose 35% between 23 February and 5 October, and petrol 23% ^[11]. Von der Leyen said in October that diesel prices had doubled and gas prices had risen about 140% since late February ^[5].

Fertiliser markets were hit as well. The Gulf is a hub for nitrogen fertilisers, and urea prices rose by around 70%, according to Mark Hilborne of King's College London ^[5].

What has recovered, and what has not

Recovered or recovering:

• Gulf crude exports, back to about three-quarters of pre-war levels in October ^[7].
• Atlantic Basin supply: exports from the US, Brazil, Canada and Venezuela rose by 3.5 million b/d between February and May ^[2].
• The oil price risk premium, which has fallen sharply this week ^[7].

Still fragile:

• Inventories. Commercial oil stocks in major consuming countries are near 15-year lows ^[12].
• LNG. Wood Mackenzie expects the global LNG market to stay tight until autumn 2028 even if the war ends this year ^[8].
• European gas storage. Storage may fall to around 17–20% by the end of March ^[8].
• Diplomacy. Washington and Tehran remain far apart on key terms, and the new Congress does not take office until January ^[12].

What it means for buyers

The war has changed how energy buyers think about risk. Three lessons stand out for the importers and traders we work with:

1. Route risk is now a price. Freight and war-risk insurance became some of the largest costs of moving Gulf oil. Our analysis of Hormuz tanker rates shows how far they rose.
2. Stocks matter more than flows. With inventories this low, even a short new disruption would move prices quickly ^[12].
3. Gas and diesel lag crude. Lower crude prices will reach European gas and diesel bills only slowly, because storage and distillate stocks are depleted ^[8,11].

The energy market may be past the worst of the shock. Rebuilding the buffers used up in 2026 will take most of 2027.