It has been nearly five months since the US-Israeli military operation on Iranian territory. The resultant oil shock has followed a familiar script: a war or political rupture takes a few million barrels per day off the market, prices climb, and producers and consumers seek to close the gap.
The Iran war has triggered the deepest oil shock in modern history and it is projected to worsen, according to the International Monetary Fund. Current oil losses exceed those of the 1973 embargo, the 1979 Iranian revolution, the 1990 Gulf war and the 2022 Russian invasion of Ukraine.
Back in the late 1970s, the Iranian revolution led to the country's sharpest collapse in oil production: output fell from 5.3 million bpd in 1978 to 1.48 million bpd by 1980, a 72 per cent drop that pushed it from the world's fourth biggest producer to 15th.
Iraq briefly benefited, reaching a peak of 3.49 million bpd in 1979 and overtaking Iran, but the war between the two countries that started in September 1980 devastated both. Iraqi production had fallen to 0.91 million bpd by 1981, while Iran's hit 1.32 million bpd the same year.
Kuwait, producing around 2.6 million bpd in 1979, drifted lower through the Iran-Iraq war years (1980-1988) as the country took capacity-management measures to maintain massive reserve horizons and co-ordinate output adjustments as a core member of Opec. The First Gulf War then delivered the most violent shock of all: Kuwait's oil production went from 0.96 million bpd in 1990 to 0.18 million bpd in 1991, as its wells were set alight, while Iraq's fell from 2.84 million bpd in 1989 to just 0.29 million bpd in 1991 under invasion and embargo. Each country dropped to its worst world ranking of output, Kuwait at 33rd and Iraq at 30th in 1991.
Recovery and Iraq war
Kuwait recovered fastest, rebuilding to 1.94 million bpd by 1993 and above 2.1 million bpd by 1995, its damaged fields restored.
Iraq's recovery was hampered by UN sanctions, which held output through the mid-1990s, and a further dip came with the 2003 Iraq war (2.12 bpd in 2002, down to 1.34 million bpd in 2003), after which, post-war field development, Iraq drove production up more than 250 per cent to a record 4.78 million bpd by 2019.
Iran has faced many cycles of international sanctions: US and EU measures in 2011–2012 meant output slumped from 4.45 million bpd in 2011 to 3.61 million bpd by 2013; the 2016 nuclear deal lifted it back to 4.94 million bpd by 2017; and the 2018 US withdrawal and the 2019 loss of export waivers drove it down to 3.25 million bpd by 2020.
Now, with the Strait of Hormuz blocked and Houthi rebels threatening a blockade of Red Sea chokepoint, the Bab Al Mandeb strait, nearly a quarter of global oil supply is at risk.
