Iran’s New Supreme Leader and the Rising Risk to Global Oil Supplies
Oil prices experienced significant volatility this week as Iran appointed Mojtaba Khamenei as its new supreme leader following the assassination of his father, Ayatollah Ali Khamenei, and simultaneously escalated attacks on regional energy infrastructure. The situation has ignited fresh concerns about potential disruptions to global oil supplies, particularly through the critical Strait of Hormuz.
Escalating Conflict and Oil Price Volatility
Brent crude oil prices initially surged to nearly $120 per barrel on Monday, March 9, 2026, after attacks on Israeli and Gulf country energy facilities. While prices subsequently retreated to around $100 and then below $90 on Tuesday, March 10, they remain more than 20% higher than at the start of the conflict on February 28, 2026. AP News
Iran’s Attacks and Regional Impact
Iran has broadened its attacks across the Middle East, targeting oil and water facilities in Gulf countries. These actions have sparked accusations of “treasonous” behavior and threats of military retaliation from regional powers. The attacks have directly affected Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, and Bahrain. Al Jazeera
The Strait of Hormuz: A Critical Chokepoint
A significant concern is the potential closure of the Strait of Hormuz, a narrow sea passage connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. Approximately 20% of the world’s oil supply passes through this vital waterway. Shipping analytics firm Kpler reported that commercial traffic through the strait has almost completely halted. Financial Times
Gulf States’ Storage Capacity and Production Cuts
Gulf states possess collective storage capacity of roughly 343 million barrels of oil, which could temporarily delay production cuts. However, with approximately 15 million barrels of crude oil and over 4 million barrels of refined products traversing the Strait of Hormuz daily, JP Morgan estimates that collective buffer storage was only sufficient for around 22 days as of February 28, 2026.
Iraq, with only six days of storage capacity, has already begun cutting output by approximately 1.5 million barrels per day. Saudi Arabia, possessing about 66 days of storage capacity as of February 28, is diverting exports through the Red Sea port of Yanbu, while the UAE is utilizing Fujairah. However, these alternative routes can only accommodate about one-third of the oil normally transported through the Strait of Hormuz.
Reports indicate that Saudi Arabia has reduced production by 2.5 million barrels per day, the UAE by 500,000 to 800,000 barrels per day, Kuwait by 500,000 barrels per day, and Iraq by 2.9 million barrels per day. Financial Times
Potential for Further Price Increases
A major disruption to oil production and exports from the Gulf region could significantly drive up prices. Qatar’s Energy Minister has suggested prices could reach $150 per barrel if the conflict persists and production is halted. Saudi Aramco has warned of “exceptionally serious impacts” if shipping disruptions in the Strait of Hormuz continue. Financial Times
Attacks on Energy Facilities
On March 2, Iranian drones targeted Saudi Aramco’s Ras Tanura refinery, prompting a temporary closure for damage assessment. The same day, attacks similarly targeted Ras Laffan in Qatar, the world’s largest LNG export facility, leading to a force majeure declaration on exports. Further attacks occurred on Sitra Island in Bahrain and Shaybah oil field in Saudi Arabia on March 9. AP News
Mojtaba Khamenei’s First Actions
Shortly after his appointment, a picture of a missile aimed at Israel bearing the inscription “At your service, Sayyid Mojtaba” was posted on Iranian state television. The Independent
The appointment of Mojtaba Khamenei follows the assassination of his father, Ayatollah Ali Khamenei, in joint United States-Israeli strikes. The Assembly of Experts selected the 56-year-old to lead the Islamic Republic through its biggest crisis in 47 years. Al Jazeera