How will strikes on Iran affect global energy flows?

Energy markets and global oil flows face potential disruption as tensions escalate between Iran, Israel, and the United States following recent air strikes by the latter two nations on Iranian territory on February 28, 2026, amid growing fears that the US may seek regime change in Tehran and risk wider regional conflict. While Iran's direct contribution to global oil supply has diminished due to sanctions, accounting for less than 3% of global production at 3.45 million barrels per day in January, its strategic control over the Strait of Hormuz through which 21 million barrels of oil from Gulf neighbors pass daily remains a critical vulnerability. The market has already responded with oil prices rising nearly $10 per barrel since the start of the year, reflecting trader concerns about potential supply disruptions despite Iran's exports primarily flowing to China rather than the broader global market. Iran's ability to influence energy markets extends beyond its own production capabilities, as the country maintains a network of militias across the Middle East that could target energy infrastructure and shipping lanes. The regime's acute vulnerability stems from its shallow coastline, with nearly all crude exports flowing through a single terminal at Kharg Island. Analysts suggest that while Iran could attempt to close the Strait of Hormuz or call on its regional proxies to disrupt energy flows, such actions would likely be self-destructive given the regime's already precarious economic situation and the global community's capacity to absorb temporary supply shocks. The Organization of the Petroleum Exporting Countries (OPEC) is scheduled to meet on Sunday to discuss April output, with expectations that the group may increase production by three to four times the initially planned 137,000 barrels per day to calm markets. Meanwhile, Chinese refiners, which have benefited from discounted Iranian crude, face potential margin squeezes if forced to shift to more expensive Middle Eastern grades, potentially creating additional political tensions between Washington and Beijing. Despite current concerns, energy industry veterans point to successful navigation of previous shocks during the COVID-19 pandemic and Russia's invasion of Ukraine, suggesting the sector has developed significant flexibility to adapt to changing geopolitical circumstances.