The global oil and gas industry, a cornerstone of the modern economy, faced profound disruption in early 2026 due to the outbreak of direct military conflict involving the United States, Israel, and Iran. Starting with large-scale strikes triggered the effective closure or severe restriction of the Strait of Hormuz, one of the world’s most critical energy chokepoints. This led to the largest supply disruption in the history of the global oil market. Currently, a fragile ceasefire holds amid ongoing negotiations (with Pakistan playing a mediation role in some talks), but the conflict’s legacy of volatility, elevated prices, and supply chain reconfiguration continues to reshape the industry. Before the February 2026 escalation, the global oil and gas industry was navigating a complex balance of rising demand in emerging markets, supply growth from non-OPEC+ producers, energy transition goals, and lingering post-pandemic adjustments. The global oil demand was hovering around 102–104 million barrels per day (mb/d) in 2025, with projections for modest growth of 0.6–1.4 mb/d in 2026 depending on the forecaster (EIA lower, OPEC higher). Whereas the supply was robust, led by the United States (production ~13.5–13.6 mb/d), alongside gains in Brazil, Guyana, and Canada. Non-OPEC+ supply growth was a key theme. However, the OPEC managed production with voluntary cuts to support prices, but inventories built in late 2025, pointing to potential surpluses absent disruptions. Brent crude averaged around $69–81/b in 2025 periods. On the other hand, the LNG trade continued expanding, with the US as a major exporter. Qatar and Australia remained dominant suppliers. Global gas demand grew steadily for power generation and industry, though Europe accelerated diversification post-2022 crisis. The industry faced long-term pressures from electrification, renewables growth, and policy-driven de-carbonization, but fossil fuels still supplied the vast majority of primary energy, especially in Asia.
The current situation has severely disrupted the maritime traffic in the Strait of Hormuz. The Strait carries ~20–25% of global seaborne oil trade (~20 mb/d pre-war) and significant LNG volumes, primarily from Saudi Arabia, UAE, Iraq, Kuwait, Qatar, and Iran itself. Iran declared the Strait “closed” or heavily restricted starting early March 2026, with attacks on vessels, threats, and insurance spikes leading to near-standstill traffic. US naval responses and a later blockade of Iranian ports compounded the chaos. Alternative routes (e.g., Saudi Red Sea ports, UAE pipelines) ramped up but could not fully compensate, handling ~7 mb/d vs. pre-war norms. The global oil supply plunged dramatically: estimates of 8–10 mb/d losses in March 2026, with OPEC+ output dropping sharply due to shut-ins (e.g., 7.5–9+ mb/d in Gulf producers). Cumulative losses exceeded hundreds of millions of barrels. Brent crude surged: from pre-war ~$70s to over $100–120/b at peaks in March, averaging $103/b that month. Forecasts saw Q2 2026 peaks near $115/b before easing with partial resumption. The refineries runs dropped (e.g., 6 mb/d cuts in some periods), margins spiked for distillates, and demand destruction began in affected regions. IEA noted potential 2026 demand contraction in early post-war outlooks. Likewise, Qatar LNG production faced disruptions (South Pars/North Field shared reservoir risks from strikes). Spot LNG prices spiked, with cargoes reaching $20–30+/MMBtu. Pakistan and other South Asian buyers were hit hard. A conditional ceasefire emerged around early April 2026, with talks ongoing into May. However, shipping restrictions lingered, and a risk premium remained in prices.
The higher energy costs acted as a “tax” on importers, fueling inflation, pressuring balance of payments, and slowing growth. IMF and others noted impacts on tourism, investment, and confidence beyond the immediate region. The stock builds in some areas contrasted with draws elsewhere; floating storage increased near the Gulf and the Airlines, shipping, chemicals, and fertilizers faced cost surges.
The Diversification of routes, increased US and other non-Gulf supply utilization, strategic reserve draws (where available), and accelerated renewables in some cases. OPEC+ dynamics shifted with involuntary cuts; quotas became less relevant amid physical constraints. The potential acceleration of energy security measures, nearshoring of supply chains, and investment in alternatives, though fossil fuel dependence persists in the medium term. The Europe and Asia (importers) faced higher costs; US benefited relatively as a net exporter with domestic production whereas the Gulf producers suffered revenue losses from shut-ins despite higher prices per barrel.
Pakistan, with a population exceeding 240 million and an economy heavily reliant on imported energy, has been among the hardest-hit developing nations. The country imports nearly all its oil and significant LNG, with much transiting or sourced near the disrupted Strait. Pakistan imports the bulk of its ~0.5–0.6 mb/d needs, used primarily for transport and power. The LNG imports from Qatar/UAE grew but faced surplus issues in early 2026 due to solar growth and lower demand. Pakistan reduced LNG reliance somewhat via renewables. Overall, the Energy imports strain the current account; power sector relies on imported fuels for peaks. LPG imports from Iran were also notable (~60% in some reports). The Hormuz restrictions slashed reliable imports. Spot LNG purchases became necessary at premiums ($18–30+/MMBtu vs. prior contracts). Only a fraction of normal shipments arrived in March. The global oil surge drove domestic fuel price hikes. Petrol and diesel costs rose sharply, feeding broad inflation. The government imposed austerity, subsidies strained budgets, and warnings issued on growth and BoP pressures. Gas shortages loomed for summer peaks despite prior surplus. Factories, transport, and agriculture (fertilizers) hit. Emergency measures included ramping domestic oil/gas production (e.g., new high-output wells) and alternative sourcing. Karachi port issues with stranded containers for Iran; rerouting via Red Sea increased costs/insurance. Pakistan explored land routes and issued transit orders. Widened trade deficit, rupee pressure, higher electricity tariffs, and slowed GDP growth. South Asia (Pakistan, Bangladesh) most exposed per analysts. Solar/wind helped cushion somewhat, but not enough for full resilience.
As of May 2026, partial recovery in shipping and ceasefire talks offer hope, but full normalization depends on diplomacy. Oil prices are expected to ease toward $76–90/b later in 2026–2027 if disruptions subside, though volatility persists. The accelerated energy diversification, strategic stockpiling, and investment in non-Middle East supply. However, the potential demand destruction and slower growth in 2026 forecasts revised downward and Geopolitical risks now a permanent premium in pricing models. In this situation The higher energy costs acted as a “tax” on importers, fueling inflation, pressuring balance of payments, and slowing growth. IMF and others noted impacts on tourism, investment, and confidence beyond the immediate region. The stock builds in some areas contrasted with draws elsewhere; floating storage increased near the Gulf and the Airlines, shipping, chemicals, and fertilizers faced cost surges.
The Diversification of routes, increased US and other non-Gulf supply utilization, strategic reserve draws (where available), and accelerated renewables in some cases. OPEC+ dynamics shifted with involuntary cuts; quotas became less relevant amid physical constraints. The potential acceleration of energy security measures, nearshoring of supply chains, and investment in alternatives, though fossil fuel dependence persists in the medium term. The Europe and Asia (importers) faced higher costs; US benefited relatively as a net exporter with domestic production whereas the Gulf producers suffered revenue losses from shut-ins despite higher prices per barrel. There is a need for energy mix diversification: more renewables, domestic exploration, efficiency, and regional pipelines (if geopolitics allow, e.g., Iran-Pakistan gas). So the economic reforms to build resilience against external shocks so the prolonged crisis risks deeper fiscal strain and social impacts. The 2026 US-Iran War exposed the fragility of global energy architecture despite decades of warnings about chokepoints like Hormuz. What began as a targeted military operation unleashed supply shocks rivaling or exceeding historical crises, spiking prices, disrupting trade, and disproportionately burdening import-dependent economies like Pakistan. While the industry demonstrates resilience through alternatives and market adjustments, the human and economic costs thousands affected, millions facing higher living costs underscore the need for sustained diplomacy and accelerated sustainable energy transitions.
For Pakistan, the crisis amplifies existing vulnerabilities but also catalyzes potential long-term reforms. Verifiable data from IEA, EIA, Reuters, and official reports confirm the scale: supply losses in the millions of barrels daily, price surges exceeding 30–50% at peaks, and cascading effects on inflation and growth. As negotiations continue, the world watches whether this shock accelerates a more secure, diversified energy future or entrenches old dependencies.
The author is a freelance writer, columnist, blogger, and motivational speaker. He writes articles on diversified topics. He can be reached at sir.nazir.shaikh@gmail.com