Home News 
No matter how the Iran war is resolved, the US and other countries will be forced to face the global oil market in complete disarray.
Low investment in the oil industry makes the current supply more alarming globally, industry experts say, forcing the US, the EU, and various Gulf countries to scramble over where and how to extract.
Before the US attack on Iran on February 28, the situation was already tense. Iran basically controls the Strait of Hormuz, the world’s busiest oil transit channel. Transportation through the station is currently closed, despite President Donald Trump’s promise to keep it open. Regardless of how this situation resolves, the broad implications of structural underinvestment throughout the oil and gas value chain have revealed how unstable the global energy infrastructure is.
“This is not your father’s power sector,” said Adam Turnquist, Chief Technical Strategist of LPL Financial, said.
In essence, there has been a shift from the “drill down” to returning cash to shareholders through dividends and free cash flow, he explained. This change led to better stock performance and improved financial metrics, such as credit spreads and default volatility. But, Turnquist adds, “there is evidence of underinvestment.”
‘Multi-Million Bin Disruption’
Remember the period 2011-2014 when oil prices were over $100 per barrel. Major oil companies such as ExxonMobil, Chevron Corp, BP plc, Shell plc and TotalEnergies SE have enjoyed strong cash flows, allowing them to generate higher profits and reward shareholders.
When oil prices fell between 2014 and 2016, institutional shareholders pushed hard for discipline instead of growth. Companies, instead of digging hard, have returned more money to investors through buybacks and dividends.
In 2023, alone, Exxon, Chevron, Shell, TotalEnergies, and BP returned a record $114 billion to shareholders – 76% higher than their average payouts.
“That has translated into lower levels of renewables, less sanctions on long-term megaprojects, and a bias towards shorter-cycle barrels, as global demand continues to grow,” Benny Wong, Senior Energy Analyst at PitchBook, told Global Finance.
There has also been a shift in energy, and companies have prioritized ESG (environmental, social, and governance) issues in long-term oil projects, resulting in significant reductions in fuel investment.
“The result is reduced spare capacity and a smaller pipeline of viable projects, limiting the industry’s ability to reverse sudden, billion-barrel disruptions such as those from the Iran conflict,” Wong added.
Oil Prices Spike
So far, the shock is coming back around the world. Brent crude, the international benchmark, entered 2026 oversupplied, with prices previously in the $50s, according to Chas Johnston, senior analyst at CreditSights.
On Monday, the price of Brent crude rose to $119.50 per barrel—the highest level since the summer of 2022, when Russia invaded Ukraine.
“It’s about the same,” Turnquist said, citing Bloomberg data. Look at the chart below.
West Texas Intermediate (WTI), the US benchmark, also saw a similar rise in prices, briefly reaching $119.48 per barrel. Late Monday, prices fell below $90 per barrel, following mixed signals from US leadership, including conflicting statements from Trump and Defense Secretary Pete Hegseth about the conflict timeline.
And it could be worse, according to Wood Mackenzie, an energy consulting firm. On Tuesday, the company determined that $200 per barrel is “out of the realm of possibility in 2026.”
To eliminate panic, extreme measures are considered. The 32 member countries of the International Energy Agency (IEA) agreed on Wednesday to make 400 million barrels of oil from emergency reserves available on the market to deal with the current disruption. That’s double the amount the IEA put on the market for 2022.
Over the weekend, Energy Secretary Chris Wright said the US may release 400 million barrels of oil to lower gas prices.
Trump then confirmed that he would ease sanctions on certain countries to help lower oil prices. This follows the recent 30-day waiver announced by US Treasury Secretary Scott Bessent on sanctions on Russian oil sales to India, due to global supply pressures.
Can Any Country Fill The Gap?
In a strange twist, oil-producing countries such as Bahrain and Kuwait have declared “force majeure,” halting production as storage nears capacity and exports dwindle. With Iran, Israel, and the US each targeting energy infrastructure and the narrow Strait of Hormuz under threat, it is unclear what other transportation routes or sources of supply could fill the gap.
Saudi Arabia and the United Arab Emirates are still the two main options because they hold most of OPEC’s active spare capacity. However, analysts are still questioning how much of a cushion there really is and how long they can last. Reports already suggest that Saudi Arabia and the UAE have begun to cut output by several million barrels per day.
“In other words,” said Wong, “the buffer has a purpose but is not limited, especially if the disturbance is extended or expanded in the region.”
West African and Guyanese deepwater projects won’t soon replace lost supplies, either. However, they could boost global production in the medium to long term, Wong said. Guyana’s fast-growing offshore sector, for example, could add more production in the coming years, although the expansion will take time.
Then there is Namibia, which has had significant offshore discoveries in recent years. BP, Shell and TotalEnergies are among the companies that have set up shop there, but as Wong puts it: “Commercial production is still a few years away.”
US Shale Another Problem
As for the US, a rapid ramp up now requires more than a strong price signal.
“Producers are operating under tight financial discipline, and scaling up quickly requires having available metals, completion crews, frac sand and pipeline capacity, all of which can act as barriers,” Wong said.
CreditSights’ Johnston agrees.
“The ability of US producers to respond is also quite limited, because it still takes six to nine months to bring new production online, even in the short-term shale industry,” he said.
Until then, the stakes remain high. Wood Mackenzie projects about 15 million barrels per day (mbpd) of Gulf oil exports could be lost if the Strait of Hormuz remains disrupted. They note that alternatives such as US shale and unfinished wells could add a few thousand barrels a day within months – not even close to filling the 15 million barrel gap.
The circumstances are enough to give analysts pause, given the attitude from the US.
Turnquist echoed a point his firm’s chief strategist made during a recent call: “You can’t shake the beehive and bring it back.” Once a country’s problems are created, they rarely resolve quickly, he said, pointing to the wars in Iraq, Afghanistan and Russia-Ukraine as examples.
“There are really no tangible signs that it will end anytime soon,” he added.
