On 28/2, the United States and Israel launched attacks on Iran, resulting in the death of Iran’s Supreme Leader Ali Khamenei. Iran swiftly retaliated with operations targeting Israeli territory and multiple US bases across Middle Eastern countries.

Analysts suggest these developments could interrupt oil and gas production in the Gulf nation and damage the broader energy infrastructure of the Middle East.

Crude oil production

Iran possesses some of the world’s largest oil reserves. Data from the US Energy Information Administration (EIA) indicates that by the end of 2023, Iran accounted for 24% of the Middle East’s oil reserves and 12% globally. Despite this, production has been constrained by years of international sanctions and insufficient investment.

Iran’s energy infrastructure and main extraction points. Graphics: LSEG, Reuters

Currently, this Gulf nation is the third-largest crude oil producer within the Organization of the Petroleum Exporting Countries (OPEC), contributing 4,5% of global supply.

The country produces 3,3 million barrels of crude oil daily, along with approximately 1,3 million barrels of condensate and other liquid fuels. Iran’s refineries have a combined capacity of 2,6 million barrels per day, according to consultancy FGE.

Iran’s oil and gas extraction sites are concentrated in southwestern provinces, including Khuzestan for crude oil, Bushehr for natural gas, and South Pars for condensate.

The Abadan oil refinery in Southwest Iran in 2019. Photo: Reuters

Analysts note that if Iran’s oil output declines, Saudi Arabia and other OPEC members could potentially compensate using their spare capacity. However, the group’s capacity is limited, as OPEC has gradually increased production over the past year. On 1/3, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to boost production by an additional 206.000 barrels per day in April.

Previously, due to the severe impact of sanctions, Iran was exempt from complying with quotas when OPEC+ tightened production.

Crude oil exports

While Iran’s economy is relatively diversified compared to other Middle Eastern countries, oil remains its economic lifeline, significantly contributing to the national budget and foreign exchange reserves. An EIA report shows that in 2023, Iranian oil companies earned 53 billion USD from fuel exports.

In its 6/2025 report, the International Energy Agency (IEA) estimated that Iran exports approximately 1,7 million barrels of crude oil and condensate daily. The country is also a major exporter of petroleum products, with nearly 820.000 barrels of fuel per day, according to data firm Kpler, a slight increase from 2024.

About 90% of crude oil exports pass through Kharg Island, for transit via the Strait of Hormuz. This route connects the Persian Gulf to the Arabian Sea, serving as a transit point for approximately 25% of seaborne crude oil and 20% of global liquefied natural gas (LNG).

Destinations of Iranian crude oil exports. Unit: thousand barrels/day. Graphics: Kpler, Reuters

For many years, China’s private refineries have been the primary buyers of Iranian oil. During the 2020-2023 period, Tehran increased production by 1 million barrels per day due to high demand from Beijing.

The US Department of the Treasury subsequently sanctioned several private Chinese refineries for these activities. Beijing stated it does not recognize unilateral sanctions against its trading partners. However, China’s imports of Iranian crude oil are gradually decreasing.

This year, China’s imports of Iranian crude oil and condensate averaged 1,2 million barrels per day, a 14% decrease compared to last year, according to Kpler data.

To protect its oil production from potential US attacks, Iran has recently built massive floating oil storage facilities, currently holding up to 200 million barrels. This amount is equivalent to two days of global fuel consumption, according to Kpler data from 27/2.

Iran has evaded sanctions for years through various methods, including ship-to-ship transfers at sea, altering origin, or concealing tanker locations from satellites.

Natural gas reserves

Iran produces natural gas from the offshore South Pars gas field. South Pars/North Dome is the world’s largest gas field, with the North Dome portion currently exploited by Qatar.

However, sanctions and technical limitations mean that most gas extracted from South Pars is used domestically. According to Gas Exporting Countries Forum data, Iran’s total gas production in 2024 reached 276 billion cubic meters. Of this, 94% was consumed domestically, with the remainder exported to neighboring countries such as Turkey and Iraq.

Location of the Strait of Hormuz and surrounding countries. Graphics: NASA

In 6/2025, Israeli attacks struck four facilities at the South Pars field. Many of these facilities were joint ventures with US energy corporations like ExxonMobil and ConocoPhillips.

Last weekend’s attack is also projected to cause the most severe disruption in the gas market since Russia launched its military operation in Ukraine in 2/2022.

In addition to potential disruptions to Iranian exports, neighboring Qatar, one of the world’s most important gas suppliers, will also face difficulties transporting goods through the Strait of Hormuz. Although this strategic waterway is not currently blockaded, maritime tracking sites show oil and liquefied natural gas (LNG) tankers are backed up on both sides of the strait, due to concerns about attacks or lack of insurance for their voyages.

Ha Thu - Anh Tu (according to Reuters, EIA, IEA)