By Avi Salzman
HOUSTON -- It will take months for Middle East oil to fully return to prior production levels, even after the Iran War ends, said Shaikh Nawaf Al-Sabah, the CEO of Kuwait Petroleum Corporation, the country's major national oil company.
Al-Sabah was speaking by video from Kuwait at the CERAWeek energy conference in Houston on Tuesday. "It will still take us and everybody else in the Gulf a few months to reach our full production capacity, because we have had to shut in wells," he said. Analysts have estimated that more than six million barrels worth of oil production per day has already been shut in by Gulf countries, and perhaps much more.
The longer it takes for supply to return, the longer it will take oil prices to deflate from current levels. U.S. and European oil prices are trading around $100 now, and oil prices in the Middle East are trading over $180 per barrel.
Al-Sabah said that Iran's blockage of the Strait of Hormuz is such an enormous shock to the world's energy system that attempts to reroute oil supplies using other methods are "not even a stopgap."
In normal times, about 20% of the world's oil and natural gas passes through the Strait on its way from the Persian Gulf to the rest of the world. But Iran has effectively blocked it through threats and attacks.
Saudi Arabia and the United Arab Emirates are using pipelines to reroute oil away from the strait, and the U.S. and other countries are releasing strategic petroleum reserves to try to cover the gap. JP Morgan analyst Natasha Kaneva estimates that those methods are only covering about one-fifth of the shortfall today.
"All of those cannot replace freedom of navigation through the Gulf," Al-Sabah said. The war has raised an "existential question" for the countries in the region, he said.
Al-Sabah's comments were just one of several such warnings from conference attendees. Oil executives from state-run oil companies in the Gulf attempted to express the gravity of the situation via teleconference, because they couldn't attend in person as originally expected. Sultan Ahmed Al Jaber, CEO of state-owned Abu Dhabi National Oil Company, said there is no alternative to fully reopening the strait. "This is not a supply issue," he said in a recorded message. "It is a security issue. There's only one durable answer -- keeping the strait open. We cannot trade our way out of this crisis."
President Donald Trump said on Monday that negotiations have been opened with the Iranian leadership -- something Iran denied. It's still not clear what the endgame is for any negotiations.
If the resolution of the war doesn't address the strait, Iran is likely to turn it into a toll road, charging other Middle Eastern oil and gas producers to use it, former Defense Secretary Jim Mattis said at the conference.
"If we were to declare victory and basically pull out our armada, or the number of forces we've sent there, they would say, we now own the Strait, " Mattis said in front of more than 1,000 energy executives and government officials. "I think that you would see a tax for any ship going through, something completely unsustainable in the international market."
Mattis said that the military has been worried about exactly this scenario for decades, because Iran can control the strait with very low-tech weapons. The country has missiles it can fire off the back of pickup trucks, and small, agile ships like speedboats, he said.
"We're in a tough spot, ladies and gentlemen, and I can't identify a lot of good options, even as the ships carrying the Marines are heading for the Gulf," he added.
The economic repercussions still haven't fully hit, and the shock is likely to stick around even after the conflict ends -- perhaps well into next year. Energy intelligence company Enverus now expects international oil prices to average $95 in 2026 and $100 in 2027.
"The situation is extremely grave," said independent oil analyst Paul Sankey speaking on a panel about the strait Tuesday morning. Sankey recommended that the U.S. pull out of the region and allow Iran and Gulf Coast countries to figure out how to resolve the situation.
Executives like Chevron CEO Mike Wirth have said that oil prices don't yet reflect just how much oil is being pushed off the market by the conflict. Oil analysts anticipate that absent a quick resolution to the war, Europe and the U.S. could start to see prices that look more like the $180 levels being seen in the Middle East.
"That cannot endure, that type of price differential," said Jim Burkhard, S&P Global's head of Crude Oil Research. "We'll see in the coming weeks whether one comes down, the other goes up, or if they meet in the middle."
Write to Avi Salzman at avi.salzman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 24, 2026 14:34 ET (18:34 GMT)
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