Assessing Iran’s Ability to Hold the World’s Oil Supply Hostage

Iran’s Foreign Minister Abbas Araghchi stated on March 14, 2026, that the Strait of Hormuz is open to all countries except the United States and Israel, describing it as closed only to “tankers and ships belonging to our enemies, to those who are attacking us and their allies.”

The statement came immediately after U.S. strikes on Kharg Island, Iran’s main oil export hub. The regime derives most of its revenue from oil exports.

Iran earned $65.8 billion from oil, petroleum products, and gas exports in the last fiscal year, while total government revenues were projected at around $45 billion, meaning oil export earnings alone exceed the entire state budget.

Iran sells about 80 percent of its oil to China. Beijing depends on discounted Iranian crude to reduce manufacturing costs. Iranian crude has traded at around $8 per barrel below Brent.

This discount helps lower production costs at a time when export volumes are at record highs but profit margins have collapsed.

The share of loss-making Chinese manufacturers has doubled since 2018, and producer prices have fallen continuously for more than three years.

While Iran attempts to hold the world’s oil supply hostage, the war is also restricting Iran’s ability to export oil. Iran has sent at least 11.7 million barrels of crude oil through the Strait of Hormuz since the war began on February 28, all destined for China.

However, shipments of approximately 1.22 million barrels per day are significantly lower than pre-war levels. Iran had exported 2.16 million barrels per day in February, the highest level since July 2018.

Iran’s only alternative export outlet, the Jask facility on the Sea of Oman, which bypasses the Strait entirely, has rarely been used. Loading a single Very Large Crude Carrier can take up to 10 days there, compared to one or two days at Kharg Island, making it logistically marginal.

The U.S. struck more than 90 military targets on Kharg Island, destroying naval mine storage facilities and missile storage bunkers, but deliberately preserved the oil infrastructure.

President Trump wrote on Truth Social, “For reasons of decency, I have chosen NOT to wipe out the Oil Infrastructure on the island.” Trump added, “However, should Iran, or anyone else, do anything to interfere with the Free and Safe Passage of Ships through the Strait of Hormuz, I will immediately reconsider this decision.”

Kharg Island processes 90 percent of Iran’s crude exports. A CIA document from 1984 described the facilities as “the most vital in Iran’s oil system, and their continued operation is essential to Iran’s economic well-being.”

Although some people want to believe that Iran is in a position of advantage, it would be extremely easy for President Trump to crash Iran’s economy and take a chunk of China’s economy with it.

Iran’s social-media propaganda accounts are claiming that the IRGC will allow safe passage for tankers whose oil was paid for in Chinese yuan. Accounts supporting the regime are portraying this as the death knell of the petrodollar and claiming that America’s economic power is collapsing.

However, the yuan proposal is largely propaganda and de-dollarization signaling. Iran floated the idea, China’s own analysts warned against it, no country has formally agreed to the condition, and the few ships that have actually passed did not price their cargo in yuan.

The U.S. 5th Fleet, based in Bahrain, is already conducting operations against Iranian threats in the area. At the same time, Iranian missile and drone strike volumes are down 92 percent since the conflict began.

A JINSA report from March 5 stated that approximately 75 percent of launchers were destroyed. Analysts attribute the decline to U.S. and Israeli strikes on launch infrastructure, underground facilities at Esfahan and Ahvaz, airbases, and production sites.

The drone picture, however, is different. Iran’s production capacity before the war was reportedly about 10,000 units per month, leading analysts to believe that Iran could sustain drone harassment in the Strait of Hormuz for months.

However, it is unlikely that Iran is still operating at pre-war production levels. CENTCOM confirmed that it continues to strike Iran’s industrial base, including factories and weapons warehouses.

Even before the war, Iran faced its most severe energy crisis in decades, with frequent power outages and disruptions to natural gas supplies. In summer 2024, Iran’s electricity shortage was estimated at 14,000 megawatts, equivalent to roughly twice the total electricity production of Azerbaijan.

The 12-day war in June 2025 damaged oil storage sites, refineries, and power stations. A year earlier, Israel blew up two major Iranian gas pipelines, disrupting supplies that provide roughly 70 percent of the country’s energy. More than 86 percent of Iran’s electricity comes from gas-fired plants, leaving the country dangerously exposed.

Even before the latest attacks, shortages of natural gas forced authorities to burn mazut, a cheap and highly polluting heavy fuel oil, to keep power plants running.

The initial U.S. and Israeli strikes on February 28 targeted Iranian oil refineries and export terminals alongside military sites, hitting Iran’s own production capacity in the opening hours.

By March 5, the combined U.S.-Israeli force had advanced to a second phase specifically targeting Iranian defense-industrial assets, including missile and drone production facilities.

The IDF issued evacuation warnings for the Abbas Abad Industrial Zone and Shenzar Industrial Zone in Pakdasht, Tehran Province, both key defense-manufacturing areas.

While America-haters are celebrating the IRGC taking such a staunch position against the United States and Israel, the threat has limited practical effect on its stated targets.

The United States imports only about 0.5 million barrels per day from the Persian Gulf, roughly 7 percent of total U.S. crude imports and about 2 percent of overall petroleum consumption, with the vast majority coming from Canada and Mexico.

Israel does not import Persian Gulf crude and has no Israeli-flagged commercial vessels transiting the strait. Nearly all Hormuz oil flows to Asia. China accounts for approximately 38 percent, with India, South Korea, and Japan taking most of the remainder.

In a further blow to Iran’s attempted global oil blockade, Saudi Arabia converted the East-West Pipeline to full capacity on March 11 in response to the Hormuz closure.

Saudi Aramco CEO Amin Nasser confirmed the pipeline will reach its maximum capacity of seven million barrels per day within days, and ship-tracking data shows 27 very large crude carriers heading to Yanbu, with 11 already waiting to load. Yanbu exports have surged to 2.47 million barrels per day, a 330 percent increase over pre-war levels. (S&P Global, March 10, 2026)

The pipeline is a genuine strategic asset but does not eliminate Iran’s leverage over Gulf energy. Saudi Arabia exported 6.3 million barrels per day of crude last year, while the Yanbu facility can handle only about 4.5 million barrels per day, leaving a significant gap.

The shift to the Red Sea creates a new vulnerability, as oil bound for Asia must pass through the Bab el-Mandeb, the strait the Houthis made largely impassable in 2023. So far, however, the Houthis have remained out of the conflict. (Middle East Eye)

The pipeline moves crude, not refined products, and Iran’s drone strikes forced Aramco’s Ras Tanura refinery, Saudi Arabia’s largest at 550,000 barrels per day, offline on March 2, leaving refined fuels stranded regardless of pipeline capacity.

Iraq, Kuwait, Qatar, and Bahrain have no bypass options at all. Iraq’s southern output has fallen roughly 70 percent, from 4.3 million to 1.3 million barrels per day, and Kuwait has begun shutting in production as storage fills with no export route available.

The United States and Israel will continue targeting Iran’s drone and missile launch sites as well as its manufacturing facilities in order to reduce the threat to international shipping. At the same time, Iran’s own exports are declining and could be driven to near zero should President Trump decide to destroy all of the refineries and ports.

Meanwhile, some countries will find ways to bypass Iranian blockades. Furthermore, holding the world hostage is not endearing Iran to its neighbors. Despite its massive propaganda machine, Iran is unlikely to garner international support for its defense.

On the whole, the U.S. position appears much stronger than Iran’s, whose position is growing weaker each day.

The post Assessing Iran’s Ability to Hold the World’s Oil Supply Hostage appeared first on The Gateway Pundit.