Global supply chains are facing a new threat as the Iran conflict drives oil above $90 a barrel and effectively collapses the Gulf’s logistics infrastructure. The Strait of Hormuz — through which a fifth of the world’s oil and gas flows — has been rendered unsafe by Iran’s threats and attacks on vessels, creating a bottleneck that is rapidly filling up storage facilities and forcing production cuts across the region.
Kuwait has already begun shutting down production at fields that have run out of storage space — the first casualty of a storage crisis that could soon engulf Saudi Arabia and the UAE as well. Energy consultants have estimated that storage in those two countries could reach capacity within 20 days, at which point production halts could follow. Given the weeks required to restart halted oil wells, the supply impact could extend well beyond any resolution of the conflict.
The LNG dimension of the supply chain disruption is equally concerning. Qatar, which supplies roughly 20% of global LNG, has had a key terminal struck by a drone and faces a recovery timeline of weeks or months. This has disrupted supply chains for gas-fired power stations, industrial users, and heating systems across Europe and Asia. European gas prices have surged to three-year highs as buyers scramble to secure alternative supplies.
Qatar’s energy minister has issued a dire forecast: if the conflict continues, all Gulf exporters could halt production within weeks, potentially sending oil to $150 a barrel. At that price, the cost implications for global supply chains would be enormous. Transportation costs would soar, manufacturing inputs would become more expensive, and the already-stressed logistics systems that emerged from the post-Covid period would face severe additional pressure.
Financial markets have processed the supply chain alarm with widespread selling. Asia-Pacific stocks had their worst week since 2020, European and UK indices fell more than 5%, and bond yields surged to multi-year highs. Airlines — the most immediately affected link in global travel and logistics supply chains — suffered some of the biggest stock market falls of the week. The economic consequences of a prolonged Gulf energy supply chain collapse are deeply concerning.