The International Energy Agency described the supply disruption caused by the U.S. war with Iran as the largest in the history of the global oil market after cumulative lost supplies exceeded 1.3 billion barrels by June, prompting an emergency drawdown from oil reserves more than twice the size of the volumes released after Russia’s invasion of Ukraine in 2022.
The economic fallout is not limited to oil. Disruption has spread to gas, helium, fertilizer and metals markets, as well as precision industries, while military pressure has mounted on U.S. stocks of munitions and interceptor missiles and on its industrial capacity, according to estimates by Morgan Bazilian, director of the Payne Institute for Public Policy and a former World Bank energy specialist, and researcher Nadia Schadlow.
Ras Laffan disruption puts pressure on gas markets
Bazilian said Iranian missiles hit two production lines at Qatar’s Ras Laffan facility in March, while QatarEnergy forecast declines of 24% in condensate exports, 14% in helium, 13% in liquefied petroleum gas, and 6% in naphtha and sulfur, along with a 17% loss of liquefied natural gas production capacity.
Repairs to the facility could take between 3 and 5 years, while Doha estimated the annual revenue loss at about $20 billion. Bazilian said the closure of the Strait of Hormuz and the disruption at Ras Laffan together removed roughly one-fifth of global liquefied natural gas supplies from the market.
The supply disruption sent Asian gas prices sharply higher, as Japan and South Korea increased their reliance on coal. Thailand, meanwhile, doubled its renewable-energy ambitions and opened the door to nuclear power for the first time, a shift the Thai energy minister directly linked to the war.
Helium, fertilizers and metals under pressure
The fallout extended to helium, used in magnetic resonance imaging machines, chipmaking and aviation. Unlike oil, it cannot be stored for long using the same methods. Sulfur, used in industries linked to copper and silicon, has also entered the affected supply chain.
Bazilian said the U.S. War Department needs these inputs to rebuild radar systems that consume large amounts of copper. In metals markets, aluminum reached its highest price in 4 years after two of the Gulf’s largest smelters were targeted.
As propane prices surged, households in South Asia and Africa switched from gas stoves back to coal and open fires. Urea, one of the most important grain fertilizers, rose from about $450 a ton to about $700, prompting plants in India, Bangladesh and Pakistan to cut production or halt it.
A war of attrition tests stocks and industry
Schadlow said the confrontation falls within the category of wars of attrition, which are not necessarily decided by the side with the greater technological edge, but by the side better able to replace its losses and continue imposing high costs on its opponent.
Despite U.S. and Israeli superiority in the balance of conventional power, Schadlow said Iran’s regional network of allies, along with relatively low-cost missiles and drones, is forcing the United States and Israel to use expensive interceptor missiles and operate advanced ships and aircraft at a high tempo.
The ability to continue a war is measured by the capacity to convert resources into munitions, interceptor missiles and combat-ready systems, not simply by the size of gross domestic product or the defense budget. The war in Ukraine exposed the difficulty Western defense industries, designed for peacetime production rates, face in replenishing what long wars consume at the required speed.
According to Schadlow’s analysis, the United States inflicted major damage on Iran’s military capabilities and struck hardened nuclear facilities without achieving a decisive outcome, raising the possibility that the confrontation will turn into a contest over which side can bear the costs for longer.
Reshaping global energy supply chains
Bazilian said the global energy system had been based before the war on the assumption that the Strait of Hormuz would remain open and that energy and raw materials would continue to flow on dependable schedules. The disruptions, however, have prompted countries to rearrange their energy sources and supply chains.
The analysis concludes that the interconnectedness of the global economy means targeting a single facility can trigger repercussions across continents, industries and multiple markets, potentially keeping the war’s economic effects in place after the military confrontation ends.
