What is at stake in the oil markets after the attack on Iran?

SadaNews - The decision by US President Donald Trump to strike Iran creates new risks that threaten a significant portion of global oil supplies.

The Islamic Republic pumps around 3.3 million barrels per day, accounting for 3% of global production, making it the fourth largest producer in the Organization of the Petroleum Exporting Countries (OPEC). However, its impact on global energy supplies exceeds its production volume due to its strategic location.

Iran is located on one side of the Strait of Hormuz, the maritime passage through which about one-fifth of the world's oil flows from major suppliers like Saudi Arabia and Iraq.

The oil markets are closed for the weekend, and no preliminary information is available on whether the strikes on Iran or its retaliatory responses in the region on Saturday targeted energy sector assets.

Here are the main pressure points to watch in the oil markets as events unfold:

Iran's Production

Iran produces about 3.3 million barrels per day, up from less than two million barrels per day in 2020 despite ongoing international sanctions. Tehran has become more skilled at circumventing these restrictions, directing about 90% of its exports to China.

The largest oil fields are located in Ahvaz, Marun, and the West Karun group, all in Khuzestan province.

Iran's main refinery is in Abadan, which was built in 1912 and can process over 500,000 barrels per day. Other important facilities include the "Bandar Abbas" and "Star of the Persian Gulf" refineries, which process crude oil and condensates, a type of very light crude that is abundant in Iran. The capital city Tehran also has its own refinery.

For export shipments, the Kharg Island port in the northern Gulf is the main logistical center. The semi-official Mehr news agency reported an explosion on the island on Saturday, without additional details or a direct reference to the oil terminal.

Kharg Island has loading docks and distant mooring points with storage capacities reaching tens of millions of barrels and has handled exports exceeding two million barrels per day in recent years.

US sanctions deter most potential buyers from purchasing Iranian oil; however, private refineries in China remain eager buyers, provided they receive significant discounts. Tehran relies on a fleet of old oil tankers for its international shipments, often sailing with their tracking devices turned off to avoid detection.

Earlier this month, Iran rushed to load tankers at Kharg Island, likely to transfer as much oil as possible offshore in anticipation of any potential attack, a move similar to what occurred last June ahead of Israeli and US strikes.

Any targeting of Kharg Island would deal a severe blow to the Iranian economy.

Meanwhile, Iran's main gas fields are located south along the Gulf coast. The Assaluyeh and Bandar Abbas facilities process gas and condensates for domestic use in generating electricity, heating, petrochemicals, and other industries.

This area is the main export point for Iranian condensates. During the June war, targeting a local gas facility raised concerns among traders, but it did not cause a lasting spike in prices as export facilities were not affected.

Regional Risks

The Iranian Supreme Leader warned on February 1 of a "regional war" if the country were attacked by the US. Tehran states that closing the Strait of Hormuz entirely is within its capabilities.

Although this has never happened before, it represents a catastrophic scenario for global markets.

The strait is a vital artery for most Gulf crude oil exports, in addition to refined products such as diesel and jet fuel. Qatar, the world's third-largest exporter of liquefied natural gas, also depends on the strait.