Impact Assessment of US/Israel-Iran Conflict

Market / War Update

• An explosion and fire at Valero Energy Corp's 0.38 MBpd oil refinery in Port Arthur, Texas, temporarily shut down the facility. No injuries were reported, and the cause remains under investigation.
• The refinery outage contributes to rising gasoline and diesel prices due to Iran's closure of the Strait of Hormuz, a key oil and refined product waterway for Middle East producers.
• Kazakhstan's crude production has been restored after disruptions caused by Ukrainian drone attacks on the CPC pipeline and power outages at the Tengiz oilfield.
• The CPC pipeline is crucial for Kazakhstan's exports, and the country is seeking to avoid sanctions and attacks. Kazakhstan's output is now at 1.7 MBpd, with potential for further growth as companies invest in drilling deep wells.
• The US President Trump announced on 23rd Mar'26 that the US and Iran have had 'major points of agreement' in recent talks, suggesting a deal could be reached soon to settle the war.
• Trump said his Middle East envoy Steve Witkoff and close aide Jared Kushner spoke with the Iranians, and discussions would continue. He added that if the talks work out, the Strait of Hormuz will be 'opened very soon' and jointly controlled.
• The US Energy Secretary Chris Wright said global oil prices have not climbed enough to cause demand destruction, even as they remain near $100 a barrel due to the US-Israeli war on Iran. The Trump administration is releasing oil from the US Strategic Petroleum Reserve and prioritizing oil supply to Asian refineries.
• Japan plans to release oil from joint stockpiles held by producing nations in the country by the end of Mar'26. According to IEA, Japan's contribution to a record oil stockpile release coordinated by the International Energy Agency will total nearly 80 million barrels, consisting mainly of crude oil.
• Iraq declared force majeure on all oilfields developed by foreign companies due to military operations disrupting navigation through the Strait of Hormuz, halting most of the country's crude exports.
• The Strait of Hormuz is a chokepoint for around 20% of global oil and liquefied natural gas supplies. Iraq's Oil Minister Hayan Abdel-Ghani said crude production at Basra Oil Company has been cut to 0.90 MBpd from 3.3 MBpd, straining the country's already fragile finances as it relies on crude sales for nearly all public spending and more than 90% of its income.

SPR / IEA

IEA member nations have agreed to a coordinated release of 400 mln bbl — the largest emergency SPR release since the IEA was founded after the 1973 Oil Crisis. The US, under the Trump administration, is contributing 172 mln bbl structured as loans to companies with repayment including a premium.

Deliveries are expected to begin reaching the market by the end of next week and will continue over approximately 120 days. The first batch of 86 mln bbl has already been opened for bidding. Japan will release 80 mln bbl beginning 16th Mar'26.

IEA Region-wise Release Breakdown — As of 15 Mar 2026

Key Supply Infrastructure

GCC Bypass Pipelines Running Near Capacity — But Shah Gas Field Ablaze and Fujairah Zone Struck

• Saudi Arabia's East–West Pipeline and the UAE's ADCOP are fully operational, providing combined bypass capacity of approximately 6.5–7.0 MBpd above pre-conflict export levels. Both lines are running at or near maximum utilisation as of mid-Mar 2026.
• Of approximately 15 MBpd of crude transiting the Strait of Hormuz in OND'25, combined SPR releases and bypass pipeline capacity can offset roughly two-thirds — or slightly more — for the next 20 to 30 days, providing the Trump administration a window to assess strategic direction.
• New strikes directly threaten this buffer — Iranian drones struck the UAE's Shah gas field (currently ablaze) and the Fujairah Oil Industry Zone on Mar 17. A tanker was also hit near the Strait of Hormuz. Saudi Arabia intercepted over a dozen drones; Kuwait and Bahrain sustained additional attacks. These represent the first direct strikes on GCC energy export infrastructure since the conflict began.

Supply & Demand Analysis

War Scenarios Point to Global Supply Deficit of 1.35–1.90 MBpd in 2026; AMJ Quarter Most Severe

Pre-war, global supply and demand were near-balanced with a modest surplus of +0.55 MBpd projected for 2026. Both conflict scenarios introduce significant supply deficits driven by Strait of Hormuz disruptions and impacts on Iraq and Kuwait crude production.

• Scenario 1 (Preferred): Exchange of attacks between US/Israel and Iran continuing, leading to severe/significant/complete disruptions of crude oil and its products trade through the Strait of Hormuz, severely impacting Iraq's and Kuwait's crude oil production over the next 3 to 6 months. Full-year 2026 deficit: −1.90 MBpd. AMJ quarter most acute at −4.50 MBpd.
• Scenario 2 (Alternate): Partial disruptions of crude oil trade through the Strait of Hormuz, with Iran not targeting ships and oil tankers moving toward China, India, and select Asian nations outside the Western alliance. Full-year 2026 deficit: −1.35 MBpd. Balance returns to flat by OND '26.

Economic Updates

• The US Dollar Index edged higher in the session, rising from 98.95 to 99.434 level, marking a 0.5% day on day basis rise, while remaining down by 0.1% on a weekly basis. The downside was primarily driven by a pullback in US.
• Treasury yields, as market sentiment improved following indications from Donald Trump that the US would avoid targeting key infrastructure in Iran, easing near-term geopolitical risk and reducing safe-haven demand for the dollar.
• Additionally, strength in the Euro further pressured the index, given its heavy weight in the DXY basket, amplifying the overall downside move.
• The Federal Reserve decided to maintain the federal funds rate unchanged at 3.50%-3.75%, emphasizing its commitment to maximum employment and returning inflation to the 2% target. While uncertainty around the economic outlook remains elevated, particularly due to developments in West Asia, the Fed slightly revised up its GDP growth projections, kept unemployment broadly unchanged, and raised inflation projections for 2026–2027, signaling a more persistent inflation outlook.

Price Outlook

Brent Expected to Trade 90–120 USD/bbl

Brent Crude 1M Futures are expected to trade in a range of 90 USD/bbl to 120 USD/bbl over the coming 1 to 2 weeks. The coordinated SPR release and GCC bypass capacity provide a meaningful supply cushion that limits sustained upside beyond these levels.