The US-Israeli strikes against Iran and reprisals by Tehran could severely disrupt the global supply of crude oil and send prices soaring to levels not seen in years. AFP looks at the risks. Iran remains just inside the world’s top 10 oil producers even though its output has fallen sharply since the 1970s, hit in particular by rounds of US sanctions. “In 1974, Iran was the third-biggest producer in the world after the US and Saudi Arabia, and ahead of Russia, producing some six million barrels per day,” Arne Lohmann Rasmussen, chief analyst at Global Risk Management, told AFP. Today, Iran produces about 3.1 million barrels per day, according to the oil-producing cartel Opec, of which Iran is a member. This remains a significant amount, and the Islamic Republic is believed to hold the world’s third-largest crude reserves, cementing its strategic importance. Additionally, Iran’s oil industry is in far better shape than that of Venezuela, another country hit by years of US sanctions. Strait of Hormuz The main risk to the oil market remains a blockade of the Strait of Hormuz, a vital waterway connecting the Middle East to the rest of the world for oil and gas shipments, which Iran has frequently threatened to paralyse. Local Iranian media reported late Saturday that the country’s Revolutionary Guards had warned “various ships” the strait was currently unsafe to navigate due to US and Israeli attacks and therefore effectively closed. The impact on oil prices will remain unknown until Brent futures markets reopen for the coming week, but analysts have sounded warnings about such a scenario. “In the event of a prolonged blockade of the Strait of Hormuz and a regional flare-up, prices could rise much further and could reach levels between US$120 and US$140” per barrel, Kpler analyst Homayoun Falakshahi told AFP before Saturday’s dramatic developments. Approximately 20 million barrels of crude oil passed through the narrow waterway daily in 2024, equivalent to nearly 20% of global liquid oil consumption, according to the US Energy Information Administration (EIA). “Even a doubt about security in the Strait would prompt many vessels, for insurance reasons, to face difficulties transiting, as premiums would rise sharply,” said Rasmussen. According to Saxo Bank analyst Ole Hansen, “only Saudi Arabia and the United Arab Emirates possess meaningful bypass infrastructure”. The route could transport a maximum of 2.6 million barrels daily, the EIA said. Highly profitable oil Iranian crude is relatively easy and cheap to extract, with production costs as little as US$10 per barrel, making it particularly profitable, Rasmussen said. Only Saudi Arabia, Iraq, Kuwait and the UAE enjoy similarly low production costs. By comparison, major Western producers like Canada and the US typically face costs of US$40 to US$60 per barrel. With such low costs, Iran gains disproportionately from high global prices, a crucial factor for an economy heavily reliant on oil revenues. US sanctions imposed since the 1979 Islamic Revolution have left Iran with few export options, especially after President Donald Trump revived a “maximum pressure” policy on Tehran upon his return to office. Last year, Washington targeted Chinese “teapot” refineries, which operate independently of state-owned oil companies, accusing them of buying Iranian crude. China, however, continues to buy Iranian oil at below-market prices. Iran exports between 1.3 and 1.5 million barrels daily, with more than 80% of the total bound for Chinese refineries owing to US sanctions, according to Ole Hansen, Saxo Bank analyst. Explosions from projectile interceptions by Israel's Iron Dome missile defence system over Tel Aviv on Saturday. Photo / Jack Guez, AFP Impact on Iran neighbours Iran’s neighbours, from Gulf states to Turkey and Pakistan, fear an Iranian response since their hosting of US military sites places them in the firing line. They “know they are vulnerable because the Iranians have...