Oil and Gas Trade Will Never Be the Same After the Iran War
As insecurity persists in the Strait of Hormuz, the impact of the U.S.-Israeli war with Iran is likely to permanently reshape the international energy order.
Even if peace were to emerge tomorrow-and few expect it will, particularly given recent exchanges of fire-damage to oil and gas infrastructure, supply chain disruptions, and lingering concern over the vulnerability of one of the world’s most important shipping chokepoints have forced substantive reconsiderations regarding a cornerstone of the global economy.
And while higher gas prices are among the most visible consequences today, this may only be the beginning of even more far-reaching transformations to come.
“It is important to understand that the war is a major turning point and even if hostilities end, maritime uncertainty and high risk levels will prevail,” Christian Bueger, a maritime security expert and professor at the University of Copenhagen, told Newsweek.
“In the end, the crisis compounds a series of mega trends disrupting maritime order that we have been observing for some time,” Bueger said. “This includes the decline of U.S. naval hegemony, asymmetric warfare and deterrence through the proliferation of low-cost weapon systems that allows to exercise control of strategic waterways, the weaponization of critical maritime infrastructure, the growth of grey zone tactics and geopolitical fragmentation.”
Ultimately, he argued, “the new normal will not look like the old one.”
Costs of War
A recent report by AAA has found that gas prices have risen some 50 percent since the beginning of joint U.S.-Israeli hostilities against Iran in late February. That means the nationwide cost now averages at $4.48 as of Tuesday.
The primary driver of the hike has been an increase in the price per barrel of crude oil, whose trade has been severely disrupted by the conflict. Iran, which lies along the Strait of Hormuz-through which roughly a fifth of the world’s crude oil passes-has sought to leverage its strategic position to restrict maritime shipping as a means of retaliation while also striking nearby nations in the Arabian Peninsula, which host U.S. military bases and serve as a key energy exporters.
The United States has responded by effectively establishing a counterblockade outside the Strait of Hormuz, preventing transit for countries docking at Iranian ports or paying tolls imposed by Iran to access the Persian Gulf. Trump took an even further step Monday, announcing a military operation to escort vessels through the precarious flashpoint, though the effort was called off Wednesday, citing “Great Progress” in talks with Tehran.
Yet U.S. and Iranian attacks continue to test the ceasefire first announced one month ago by the White House, with a fresh trade of fire from both sides on Thursday. The latest incidents have done little to alleviate a sense of uncertainty that is prolonging an already massive drop in global oil trade, the scope of which is likely to be felt for years.
"We are not talking about a temporary disruption, we are talking about the removal of more than six hundred million barrels of energy from the global system, with almost certainly more than a billion will be lost before this is over,” Brett Erickson, a geopolitics expert and managing principal of Obsidian Risk Advisors, told Newsweek. “You do not just replace that.”
“Add to that direct strikes on energy infrastructure across the Gulf, and you are looking at damage that takes years, not weeks, to fully unwind,” Erickson said. “That is how you get a permanent increase in energy markets. Prices do not ‘come back down' after this; they settle at a higher floor because the system itself has been fundamentally uprooted."
The risks of enmeshing geopolitical tensions with crucial international chokepoints have previously reared their head. In late 2023, shortly after the Palestinian Hamas militant group launched a surprise attack against Israel that plunged the Middle East into a still-ongoing period of conflict and turmoil, Yemen’s Iran-aligned Ansar Allah-also known as the Houthis-waged a campaign of strikes against ships transiting the Red Sea.
The result was an estimated 66 percent decrease in traffic through the Suez Canal, forcing vessels to reroute around Africa and substantially driving up global shipping costs. Despite a ceasefire signed with the U.S. last May, the group only paused its operations against commercial vessels upon the signing of a U.S.-brokered Gaza peace that has been sidelined by the Iran crisis.
With the Strait of Hormuz now in the crosshairs and the looming prospect of Ansar Allah reentering the conflict, the tactic of weaponizing crucial waterways is likely to gain traction for future conflicts in the Middle East and beyond.
"What this conflict has made unmistakably clear is how vulnerable global trade is to a handful of maritime chokepoints. It does not take a large-scale naval war to disrupt them, and modern warfare capabilities now makes it easier than ever to do so,” Erickson said. “Once that risk is priced in, the impact is immediate and lasting.”
“Insurance premiums spike, vessels reroute, transit times lengthen, and operating costs climb across the board,” he added. “Those costs do not stay in the shipping industry, they move through supply chains and land directly on companies and ultimately, the consumer."
Safe embed will be rendered here
Crude oil prices – 5/7/2026
Service URL: https://public.flourish.studio/visualisation/27961719/embed
Diversification Efforts
Karen Young, a political economist serving as senior research scholar for the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs, said that the current crisis marks “the largest oil supply shock our global economy has experienced and it will have long term effects.”
“First, in how states think about diversifying supplies of oil, gas and supply chains for renewable energy. There will be efforts at redundancies, stockpiling, and using more of what natural resources exist at home,” Young told Newsweek. “This could be both positive and negative in terms of decarbonization efforts, but most of all, it is likely to increase the price of energy for most people.”
“In the medium term, we see a constriction on trade and traffic through the Gulf and this will have impacts on oil, natural gas and refined products like diesel, naphtha and jet fuel, all kinds of petrochemical products and fertilizers across our global economy for at least the next year if flows are restored relatively soon, by the end of summer,” Young said. “We risk a much more pervasive economic shock in inflationary pressure and high oil and refined product prices which could lead to recessions.”
Among the steps taken by regional countries to mitigate the effects of the Strait of Hormuz crisis has been a concentration on alternative routes.
“The primary, proven bypasses remain Saudi Arabia's East-West Petroline (Abqaiq–Yanbu, Red Sea) at its full operational capacity of 7 million bpd and the UAE's Habshan Fujairah pipeline at 1.5–1.8 million bpd,” Hesham Alghannam, the director of the Security Research Center and head of the National Security Department at Naif Arab University for Security Sciences, told Newsweek. “Together, they have already rerouted a substantial share of GCC crude during the recent Hormuz closure, I believe roughly 40 percent of pre-crisis Saudi and UAE export volumes without new construction.”
“Feasibility is strong in the short to medium term, expansions leveraged existing infrastructure, keeping capital costs far lower than greenfield projects, while logistics are mature with port upgrades already in progress at Yanbu and Fujairah,” he said. “Strategically they cut maritime exposure in the Gulf but shift some risk to overland segments, drone vulnerable, and longer Red Sea/Indian Ocean routes.”
He called it “overall, a clear net win for GCC resilience,” though he acknowledged “they cannot yet cover 100 percent of regional output without further targeted investment.”
Redrawing the Map
The conflict has also put a severe strain on GCC unity, however, with the six-state bloc coming under direct attack for the first time since Iraq’s invasion of Kuwait that sparked the First Gulf War in the early 1990s.
The consequences of the present conflict are even more damaging, with each nation-Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates-targeted by Iranian missiles and drones.
While Nader Itayim, a geopolitical expert and Middle East Gulf editor at Argus Media, referred to Saudi Arabia and the UAE as the “gold standard when it comes to contingency planning,” given their pre-war investments in pipelines that provide some alternative capacity to export oil and gas, he argued their counterparts have been left with in a less fortunate position “and have therefore seen their exports almost totally collapse.”
Even Riyadh and Abu Dhabi, Itayim told Newsweek, “will be questioning whether the current alternatives are enough,” prompting costly, logistically intensive yet potentially necessary funding for other options, including shoring up storage capacity outside the region and closer to import destinations, such as those in the Asia-Pacific.
The shattering of this region’s image as an island of relative stability, even amid turbulence elsewhere in the Middle East, may also prompt a shift in global oil and gas investment to other parts of the world.
“We could see a shift in investment more towards so-called safer jurisdictions in the west, in Asia Pacific, in South America, particularly in the short and medium terms, while the Mideast Gulf tried to shake off higher risk premiums that are bound to come for regional upstream projects,” Itayim said. “Volatility always discourages long-cycle oil and gas investment globally.”
But with the advent of war, there has been divergence among the six-state pact.
“This war appears to have expedited a redrawing of lines in the Mideast Gulf region that many believe was coming,” Itayim said.
The UAE, which has emerged as the primary target of Iranian strikes, has come out most strongly against the status quo. The country has gone beyond rhetorical condemnation of the Islamic Republic and has taken action to upend the long-established regime of oil geopolitics by announcing an exit from the expanded Organization of Petroleum Exporting Countries (OPEC+).
The move could exacerbate preexisting rifts with Saudi Arabia, the most influential power in both the GCC and OPEC+, that predate the conflict. While both states have sought to downplay any notion of schism, Abu Dhabi has emerged as a key competitor, boosting its connectivity to a diverse array of global markets, enhancing geopolitical clout and modernizing its military capabilities.
The UAE has also faced accusations of aiding militias in Libya, Sudan and Yemen, where the Saudi-backed government cracked down on a power play by southern separatists supported by the UAE earlier this year. The country’s ties to Israel, established under the 2020 Trump-backed Abraham Accords, face scrutiny from regional skeptics as well.
Saudi Arabia, despite some reports alleging pressure from Crown Prince Mohammed bin Salman on Trump to escalate against Iran in the early stages of the conflict, has adopted a diplomatic tone calling for de-escalation. Kuwait, Qatar and, to some degree, Bahrain have adopted similar stances amid the war, seeing engagement with Tehran as necessary despite their differences, Itayim said.
Meanwhile, Oman, a traditionally neutral nation that has hosted previous rounds of U.S.-Iran talks, has maintained full contact with the Islamic Republic.
“This variance in approaches almost certainly played its part in the UAE's decision to exit the Saudi-led OPEC and OPEC+ producer groups last week, with suggestions that that move could be followed by similar moves by Abu Dhabi to exit other regional organizations and frameworks it is a member of today,” Itayim said.
“This redrawing of lines, and the UAE exit from OPEC, will certainly have an impact on energy markets-not immediately, but once the Strait of Hormuz reopens,” he said. “As OPEC’s third largest producer, delivering around 13 percent of the group's output, the UAE exit will naturally weaken OPEC's hand in managing markets.”
It could also, he argued, serve as a surprise advantage for Trump as he navigates the growing fallout from a conflict that is otherwise undermining his electoral commitments to peace and lower energy prices.
“Conversely, it will also strengthen the U.S.' hand when it comes to managing prices in that it now, in theory, has a partner in the UAE that could help raise production and boost global supplies without having to go through the formalities of an OPEC meeting and decision,” Itayim said. “This is particularly pertinent for a president like Donald Trump who has had his run-ins with the group in the past.”
2026 NEWSWEEK DIGITAL LLC.
This story was originally published May 8, 2026 at 1:00 AM.