209 billion barrels: Iran’s oil muscle looms over global markets as conflict escalates

US and Israeli strikes on Iran on February 28 — followed by Tehran’s retaliation — have pushed the Middle East back to the brink. While the immediate focus remains military, the deeper shockwaves may travel through global energy markets. 

Iran holds the world’s third-largest proven oil reserves, estimated at 208-209 billion barrels as of 2024-25. That accounts for roughly 12% of global reserves and nearly a quarter of the Middle East’s total. Despite years of sanctions and constrained foreign investment, the country remains a pivotal supplier in a tightly balanced oil market. 

Production, exports & strategic weight 

Iran currently produces around 3.3 to 3.5 million barrels per day (bpd) of crude — roughly 3% of global supply — along with about 1.3 million bpd of condensate and other liquids. As the third-largest producer in OPEC, it contributes about 4.5% of global oil supplies. 

At its peak in 1974, Iran was pumping nearly six million bpd, second only to the United States and Saudi Arabia at the time. Production has since fallen to about 3.1 million bpd, according to OPEC data, but the country remains a significant force in energy markets. 

Sanctions have curbed its ability to sell freely, yet Iran continues to export an estimated 1.3 to 1.5 million bpd of crude, with the majority heading to China. In 2023, its net oil export revenues were estimated at $53 billion, up from $37 billion in 2021. While Iran’s economy is more diversified than some Gulf peers, oil remains a critical source of government income. 

Iran’s domestic refining capacity stands at about 2.6 million bpd, according to consultancy FGE. In 2025, it exported nearly 820,000 bpd of fuel products, including LPG, slightly below 2024 levels. 

Concentrated infrastructure, strategic vulnerabilities 

Iran’s oil production is heavily concentrated in its southwestern province of Khuzestan, home to major onshore fields including Ahvaz, Gachsaran, Marun, Agha Jari, Bibi Hakimeh and Karanj. Offshore, key fields such as Abuzar, Foroozan, Doroud and Salman are located in the Gulf, some shared with Saudi Arabia and the United Arab Emirates. 

Nearly 90% of Iran’s crude exports leave through Kharg Island, passing via the Strait of Hormuz — a narrow maritime corridor that has become the focal point of global concern. 

Key refineries include Abadan — one of the oldest and largest in the Middle East — along with Tehran, Isfahan, Bandar Abbas, Arak and Tabriz, which process crude for domestic use and export. 

Lessons from past conflicts 

Energy infrastructure has long been entangled in regional conflict. During the Iran–Iraq War, systematic attacks on tankers, export terminals and refining facilities in Khuzestan — including around Ahvaz — removed as much as four million bpd from global markets. Spare capacity from producers such as Saudi Arabia helped cushion the blow. 

More recently, the 2019 strike on Saudi Arabia’s Abqaiq processing facility — widely attributed to Iran — temporarily knocked out 5.7 million bpd and triggered a sharp spike in crude prices. Saudi Aramco restored output within weeks by drawing on inventory buffers and rerouting supply, which helped prices retreat. 

Those episodes underline a key market dynamic: disruption does not have to be permanent to move prices. Even temporary outages or credible threats can trigger volatility. 

The Strait of Hormuz: The bigger risk 

Roughly 20 million barrels of oil pass through the strait each day, accounting for nearly one-fifth of global consumption, according to the US Energy Information Administration. At its narrowest point, it is only about 50 kilometres wide and relatively shallow, making it inherently vulnerable. 

Iran has previously threatened or targeted activity in these waters during periods of heightened tension. Even without a full blockade, the risk of confrontation can drive up tanker insurance premiums, slow shipping, and create supply bottlenecks. Markets tend to price in that risk immediately. 

Instability in Hormuz would ripple far beyond the Gulf. Oil prices could spike sharply, inflationary pressures would intensify, and equity markets could turn volatile as investors factor in potential supply shocks. 

Thin buffers, high sensitivity 

The current environment adds to the fragility. Global oil markets are operating with limited spare capacity. Analysis from JPMorgan Chase suggests that in a severe Middle East disruption scenario, crude prices could surge well beyond $100 per barrel. 

The risks are not confined to Iran. Gulf states hosting US military bases could also become targets if the conflict widens, raising the possibility of broader regional disruption. 

With 209 billion barrels in the ground and a chokepoint that handles a fifth of the world’s oil flows, Iran’s strategic weight in energy markets extends far beyond its daily export numbers. In moments of escalation, that weight becomes immediately visible — not just in the Gulf, but across global markets.