War, Truce, and Oil – Impacts on Energy Markets
The recent escalation of hostilities between Iran, Israel, and the United States, followed by a fragile truce, has sent shockwaves through the global oil and gas industry. This conflict, centered in one of the world’s most critical energy-producing regions, has raised significant concerns about supply disruptions, price volatility, and broader economic consequences. This article explores the immediate impacts of the conflict, such as the shutdown of key energy infrastructure, as well as the longer-term implications for global oil and gas supply, market dynamics, and employment. Drawing on recent developments and expert analyses, it provides a comprehensive view of how this geopolitical crisis is reshaping the energy landscape.
Immediate Impacts of the Conflict on the Oil and Gas Industry
The military actions that unfolded in June 2025, including Israeli strikes on Iranian nuclear and energy infrastructure, Iranian retaliatory missile and drone attacks, and U.S. involvement through targeted bombings of Iranian nuclear sites, had immediate and tangible effects on the oil and gas industry. These impacts were most pronounced in the Middle East, where critical energy infrastructure was damaged, and global markets reacted swiftly to the heightened risk of supply disruptions.
Shutdown of Key Energy Infrastructure
- Iran’s Energy Sector Disruptions
Israeli airstrikes targeted several Iranian energy facilities, including the South Pars gas field, the world’s largest natural gas field shared with Qatar, and the Shahr Rey oil refinery near Tehran. Iranian state media reported a blaze at South Pars, leading to a partial suspension of production. The Shahran fuel depot was also hit, exacerbating domestic fuel shortages in Iran. Iran produces approximately 3.4 million barrels per day (bpd) of oil, with about 1.6–1.7 million bpd exported, mostly to China. The partial shutdown of South Pars, which accounts for a significant portion of Iran’s natural gas output, has raised concerns about regional gas supply stability, particularly for Qatar, which shares the field. - Israel’s Energy Sector Impacted
Iran’s retaliatory missile and drone strikes damaged Israel’s energy infrastructure, notably the Haifa-based Bazan oil refinery, one of Israel’s two major refineries. The refinery was forced to shut down all facilities after a power station critical to its operations was hit. Additionally, Israel shut down two of its three offshore natural gas fields, Leviathan and Karish, reducing its domestic gas supply by nearly two-thirds. This led to a reliance on coal and fuel oil for power generation, increasing costs and environmental concerns. Israel’s gas exports to Egypt and Jordan, which account for 15–20% of Egypt’s consumption, were also disrupted, forcing Egyptian fertilizer producers to halt operations. - Strait of Hormuz Threats
The Strait of Hormuz, a narrow chokepoint through which 20–24% of global oil and 20% of liquefied natural gas (LNG) are transported, became a focal point of concern. Iran’s parliament approved a measure to consider closing the strait, though the final decision rests with the Supreme National Security Council. While no closure occurred, the threat alone prompted shipping companies, including QatarEnergy and the Greek Shipping Ministry, to advise vessels to avoid the strait where possible. This heightened maritime security risks, with some tankers rerouting to avoid potential attacks, increasing transportation costs and delays.
Market Reactions and Price Volatility
The conflict triggered immediate volatility in global oil markets. Brent crude, the international benchmark, surged by 13% to a five-month high of $81.40 per barrel following U.S. strikes on Iranian nuclear sites, while West Texas Intermediate (WTI) crude rose to around $71 per barrel. However, prices quickly retreated to around $67–$70 per barrel as a ceasefire was announced and fears of a prolonged disruption to the Strait of Hormuz subsided. The initial spike reflected market fears of a worst-case scenario, such as a blockade of the strait, which could have halved oil supply through the chokepoint for a month, potentially pushing Brent crude to $110 per barrel.
Gold and the U.S. dollar also saw temporary rallies as safe-haven assets, while equity markets, including the S&P 500 and Nasdaq, experienced declines of 1.1–1.3% on the day of the initial attacks. Energy and defense stocks, however, gained, with companies like BP and Shell closing 1–2% higher. The subsequent truce calmed markets, with global shares hitting record highs and oil prices plummeting further, reflecting investor confidence that major supply disruptions had been avoided.
Immediate Employment Impacts
The immediate disruptions to energy infrastructure had localized but significant effects on employment in the oil and gas sector:
- Iran: The partial shutdown of South Pars and damage to refineries likely led to temporary layoffs or reduced hours for workers in these facilities. Iran’s oil and gas sector employs tens of thousands, and disruptions could affect maintenance crews, engineers, and support staff. However, the lack of direct attacks on export infrastructure meant that export-related jobs, particularly those tied to China’s demand, were less immediately impacted.
- Israel: The shutdown of the Bazan refinery and the Leviathan and Karish gas fields disrupted operations for hundreds of workers. Refinery and gas field employees faced temporary furloughs or redeployment to alternative energy sources like coal plants. The ripple effect on Egypt’s fertilizer industry, reliant on Israeli gas, likely led to temporary job losses in that sector as well.
- Global Shipping and Logistics: Increased maritime security risks in the Strait of Hormuz led to higher operational costs for shipping companies, potentially reducing hiring or leading to temporary layoffs for crews rerouting vessels. Airlines, such as Emirates, suspended flights to the region, affecting pilots, crew, and ground staff.
Long-Term Implications for the Global Oil and Gas Industry
While the immediate impacts of the conflict were significant but contained, the longer-term implications could reshape global oil and gas supply chains, market dynamics, and employment trends. The fragile truce, combined with the geopolitical fallout, introduces uncertainty that will influence investment, production, and policy decisions for years to come.
Shifts in Global Oil and Gas Supply
- Potential Reduction in Iranian Exports
Iran accounts for 3–4% of global oil production, with exports of approximately 1.6–1.7 million bpd, primarily to China. While the conflict did not directly target Iran’s oil export facilities, the threat of further escalation or tightened U.S. sanctions could reduce Iranian output. Analysts suggest that a prolonged conflict or regime change could disrupt Iran’s exports, forcing China to seek alternative suppliers, such as Saudi Arabia, Russia, or non-OPEC producers like Brazil and Guyana. OPEC+ spare capacity, particularly from Saudi Arabia and the UAE, could offset a loss of Iranian oil, with an estimated 2.5–5 million bpd available in the long term. However, this shift would increase reliance on Gulf producers, potentially strengthening their market influence. - Diversification of Supply Chains
The conflict has underscored the vulnerability of Middle Eastern oil and gas supplies, prompting importing nations to diversify their sources. India, which imports 2 million bpd through the Strait of Hormuz, has already increased reliance on Russian oil, which bypasses the strait via routes like the Suez Canal or Cape of Good Hope. Other Asian nations, such as Japan and South Korea, may follow suit, turning to the U.S., Canada, or Latin American producers. The U.S., now the world’s largest oil producer due to the shale revolution, is well-positioned to fill supply gaps, potentially boosting its export market share. Non-OPEC production growth, projected to account for 90% of oil production increases in 2025, will further reduce dependence on Middle Eastern oil. - Impact on LNG Markets
The partial shutdown of South Pars and threats to the Strait of Hormuz have raised concerns about LNG supply stability. Qatar, a major LNG exporter, relies on the strait for 20% of global LNG shipments. A prolonged closure or disruption could spike LNG prices, particularly in Europe, which has become more reliant on Middle Eastern and U.S. LNG since Russia’s invasion of Ukraine reduced pipeline gas supplies. This could accelerate investments in alternative LNG sources, such as U.S. and Australian projects, but also increase costs for consumers and industries in the interim.
Market Impacts and Economic Consequences
- Persistent Price Volatility
Even with the truce, oil markets are likely to remain volatile due to the ongoing geopolitical risk premium. Analysts predict Brent crude will trade in a $65–$80 range in the near term, with potential spikes to $100–$120 per barrel if tensions escalate again or the Strait of Hormuz is disrupted. Higher oil prices could fuel global inflation, particularly in oil-importing countries like India, Japan, and those in Europe. A $10 increase in oil prices could raise inflation by 0.5%, complicating central banks’ efforts to cut interest rates. For example, the Bank of England, which recently reduced rates to 4.25%, may pause further cuts if inflation rises above 4%. - Investment in Energy Security
The conflict has highlighted the fragility of Middle Eastern energy infrastructure, likely spurring increased investment in energy security. Countries like Saudi Arabia have developed alternative export routes, such as pipelines to the Red Sea, to bypass the Strait of Hormuz. This could lead to long-term infrastructure projects across the Gulf, creating new opportunities for engineering and construction firms but also increasing capital expenditure in the sector. Additionally, the push for renewable energy and alternative fuels may accelerate as nations seek to reduce reliance on volatile Middle Eastern supplies, potentially shifting investment away from traditional oil and gas projects. - Regime Change Scenarios
Some analysts speculate that Israel’s strikes aimed to destabilize Iran’s regime, potentially leading to a more open economic system. A regime change could increase Iranian oil exports by removing sanctions, but historical precedents (e.g., Iraq, Libya) suggest that such transitions often lead to prolonged instability, disrupting production for years. Conversely, a strengthened Iranian regime could retaliate by targeting Gulf oil infrastructure, pushing prices higher and disrupting global markets.
Employment and Jobs in the Oil and Gas Sector
The conflict and its aftermath will have significant implications for employment in the global oil and gas industry, with both short-term disruptions and long-term structural changes.
- Short-Term Job Disruptions
The immediate shutdown of facilities like South Pars, the Bazan refinery, and Israel’s gas fields has likely led to temporary job losses or reduced hours for thousands of workers. In Iran, the oil and gas sector employs approximately 150,000–200,000 people directly, with many more in related industries. Damage to infrastructure could delay maintenance and exploration projects, affecting technicians, engineers, and laborers. In Israel, the energy sector, though smaller, employs around 10,000–15,000 workers, with disruptions at Bazan and offshore fields impacting skilled roles like process engineers and rig workers. - Long-Term Employment Trends
- Increased Demand in Non-Middle Eastern Regions: As countries diversify away from Middle Eastern oil, production ramps up in the U.S., Canada, Brazil, and Guyana could create new jobs. The U.S. oil and gas industry, employing over 600,000 workers, is poised for growth as shale production expands to meet global demand. Roles in drilling, fracking, and pipeline operations could see increased hiring, particularly in states like Texas and North Dakota.
- Gulf States’ Resilience: Saudi Arabia and the UAE, with spare capacity to offset Iranian losses, may see stable or increased employment in their oil sectors, which employ hundreds of thousands. Investments in alternative export routes could create jobs in construction, engineering, and logistics.
- Renewable Energy Shift: The push for energy security may accelerate the transition to renewables, creating jobs in solar, wind, and hydrogen projects but potentially reducing long-term demand for oil and gas workers. Europe, in particular, may prioritize green energy investments, shifting employment from fossil fuels to clean energy sectors.
- Automation and Efficiency: The oil and gas industry’s increasing adoption of automation and digital technologies, spurred by cost pressures from volatile prices, could limit job growth in traditional roles like manual labor and basic maintenance, while increasing demand for data scientists, AI specialists, and cybersecurity experts.
- Regional Economic Impacts
In oil-importing countries, higher energy prices could reduce consumer spending, impacting jobs in retail, manufacturing, and transportation. Developing economies in Asia and Africa,(start here) heavily reliant on Middle Eastern oil, are particularly vulnerable to price spikes, which could lead to economic slowdowns and job losses in energy-intensive industries. In contrast, oil-exporting countries like the U.S. and Canada could see economic benefits, boosting job creation in energy and related sectors.
The recent Iran-Israel-US conflict and subsequent truce have had profound immediate and long-term implications for the global oil and gas industry. Immediate impacts, including the shutdown of key facilities like Iran’s South Pars field and Israel’s Bazan refinery, disrupted local energy production and exports, while threats to the Strait of Hormuz heightened global supply concerns. These disruptions led to temporary job losses and market volatility, with oil prices spiking before stabilizing due to the truce and OPEC+ spare capacity.
In the long term, the conflict could accelerate shifts in global supply chains, with countries diversifying away from Middle Eastern oil and gas, boosting production in non-OPEC nations like the U.S. and Canada. This shift may create jobs in these regions but could reduce employment in traditional oil-producing countries if infrastructure damage persists or sanctions tighten. Market volatility and the potential for renewed tensions will keep oil prices elevated, impacting inflation and central bank policies, while spurring investments in energy security and renewables. Employment in the sector faces a dual trajectory: growth in diversified production regions and emerging technologies, but potential declines in traditional roles due to automation and the clean energy transition.
The fragile truce offers a temporary reprieve, but the oil and gas industry remains on edge, with the Strait of Hormuz and regional stability as critical variables.