IEA: Geopolitical risk to oil and gas market in focus
Global oil markets experienced significant disruption following a sharp increase in geopolitical tensions triggered by Israel's air strikes on Iranian targets on June 13, which were met with a retaliation from Tehran.
While Israel and Iran have engaged in a covert conflict for many years, the current situation marks a pivotal escalation, particularly as energy infrastructure has now come under attack for the first time.
While there was no impact on Iranian oil flows at the time of writing, fears of a widening regional disruptions to oil traffic through the crucial Strait of Hormuz drove oil prices higher, with Brent crude futures reaching a 6-month high of $74/bbl, according to the latest monthly oil market report from the International Energy Agency (IEA).
“Iran currently produces around 4.8 million b/d of crude, condensates and NGLs, with total oil exports of about 2.6 million b/d. While the US administration has recently intensified sanctions on buyers of Iranian oil supplies, Iran’s exports of crude and condensates have remained unchanged, averaging around 1.7 million b/d so far this year, with most of it going to China,” said IEA.
“Iran is also a significant oil product exporter, with shipments of fuel oil, LPG and naphtha averaging nearly 800,000 b/d since January. Iran partially suspended production at the world’s biggest natural gas field, South Pars, after an Israeli strike caused a fire in what would be the first Israeli attack on Iran’s oil and gas sector. It is still unclear if condensate and NGL production from the South Pars Phase 14 field has been impacted," IEA continued.
The Shahran oil depot and refinery near Tehran were also targeted, but reportedly no major damage occurred. Israel meanwhile has halted more than 60% of its natural gas production capacity, including at the offshore Leviathan field, on security concerns, and has reported that Iranian strikes have damaged its Haifa refinery.
Iran has consistently warned that it may close the crucial Strait of Hormuz in response to any attacks. Even a temporary closure of the Strait would significantly disrupt global oil and gas markets. This waterway serves as the exit route for about 25% of the world's oil supply, including shipments from Saudi Arabia, the UAE, Kuwait, Qatar, Iraq, and Iran, as well as a substantial portion of the world’s spare oil production capacity, IEA said.
However, in the absence of a major disruption, oil markets in 2025 look well supplied. “World oil demand is forecast to increase by 720,000 b/d this year, marginally below last month’s estimate as weak second-quarter 2025 deliveries in the US and China undercut resilience elsewhere. Meanwhile, global oil supply in May was up by 1.9 million b/d from a year ago, led in part by the unwinding of voluntary OPEC+ production cuts,” the report noted.
In 2025, the world's oil supply is expected to increase by 1.8 million b/d, reaching a total of 104.9 million b/d, with an additional rise of 1.1 million b/d anticipated in 2026. Non-OPEC+ producers are projected to contribute an average of 1.4 million b/d this year and 840,000 b/d next year.
As supply outpaces demand, global oil inventories have seen an average increase of 1 million b/d since February, with a substantial rise of 93 million bbl reported in May, based on preliminary data. While the current market appears well-supplied, recent events underscore the significant geopolitical risks to the security of oil supply.
