Saudi Arabia has begun cutting oil production as near-complete blockades of the Strait of Hormuz cause crude storage facilities across the Gulf to fill up, according to sources familiar with the situation.
The move comes as several other regional producers — including the United Arab Emirates, Kuwait, Iraq and Qatar — also scale back production amid disruptions linked to the ongoing US-Israel-Iran conflict that has choked off exports from key Gulf shipping routes.
The supply shock has pushed Brent crude above $100 a barrel for the first time in four years, raising concerns of prolonged price volatility that could strain the global economy.
Storage Pressure Forces Production Cuts
With tanker traffic severely restricted through the Strait of Hormuz, Gulf producers have struggled to move crude to international markets. The limited rerouting of oil through Saudi Arabia’s East-West Pipeline to the Red Sea port of Yanbu — capable of carrying about 5 million barrels per day — has provided only partial relief.
As a result, storage tanks across the region are nearing capacity, forcing producers to reduce output pre-emptively to avoid damaging oilfields or triggering emergency shutdowns.
In southern Iraq, production from major fields has reportedly dropped to about 1.3 million barrels per day, a 70% decline from normal levels. Meanwhile, Kuwait has declared force majeure on some exports, while Qatar has temporarily halted liquefied natural gas (LNG) shipments.
Global Energy Markets on Edge
The disruptions underscore the strategic vulnerability of the Strait of Hormuz, which links the Persian Gulf to global shipping lanes and carries around 20% of the world’s oil supply.
With commercial shipping through the narrow passage nearly paralysed, traders and governments are scrambling to respond to what analysts describe as one of the most serious energy supply shocks in years.
Neither Saudi Aramco nor Gulf energy ministries have issued detailed public statements. However, industry sources say the production cuts are designed to maintain operational flexibility while preventing full shutdowns of major oilfields.
The International Energy Agency is reportedly considering a release of strategic petroleum reserves to help stabilise markets if disruptions persist.
Prolonged Price Pressure Expected
Energy analysts warn that the combination of blocked exports, limited storage capacity and heightened geopolitical tension could keep oil prices elevated for months.
Such a scenario would also disrupt supply plans previously outlined by the OPEC+, which had aimed to maintain relatively stable production levels through 2026.
Market watchers say the unfolding crisis highlights how quickly geopolitical conflict in the Gulf can ripple through global energy markets — with consequences for fuel prices, inflation and economic growth worldwide.
