Why West Asian conflicts send shockwaves through global energy markets

As tensions rise in West Asia, disruptions at major oil and gas hubs are shaking global energy markets, highlighting how deeply the world depends on the region's powerful producers

The ongoing conflict in West Asia has shaken global energy markets, once again showing how central the region is to oil and gas supplies. 

An Iranian attack on Saudi Arabia forced state oil company Saudi Aramco to halt operations at a refinery in the Ras Tanura oil complex, a key export terminal for Saudi crude. Around the same time, Qatar, one of the world’s largest exporters of liquefied natural gas (LNG), halted LNG production after it intercepted two Iranian drones targeting an energy facility in Ras Laffan Industrial City, home to a major LNG hub. 

European natural-gas prices jumped nearly 40 per cent following the developments, the Wall Street Journal reported. Iran’s willingness to target military and industrial assets in countries that host US military bases has also raised fears that energy facilities across other Gulf nations could come under threat. 

 

These incidents underline a simple reality: a handful of Gulf countries dominate global energy production. Any disruption in the region quickly affects prices worldwide.

Gulf producers dominate regional energy output

Data for 2023 from the US Energy Information Administration shows that a small group of Gulf countries account for most of West Asia’s energy production, measured in quadrillion British thermal units (Btu). 

Saudi Arabia was the largest producer by a wide margin in 2023, with total energy output close to 28 quadrillion Btu annually. Most of this comes from petroleum and other liquids, while natural gas makes up a smaller but still important share. 

The same year, Iran ranked second at roughly 19 quadrillion Btu annually. Unlike Saudi Arabia, Iran’s output was more balanced, with large contributions from both oil and natural gas. 

The United Arab Emirates produced about 11 quadrillion Btu, mainly from oil, along with some natural gas and a small share from nuclear and renewables. Qatar, at around 10 quadrillion Btu, depended heavily on natural gas, which forms the largest part of its energy mix. 

Iraq produced nearly 9 quadrillion Btu, almost entirely from oil. Kuwait followed with about 7 quadrillion Btu, again mostly petroleum. Oman produced roughly 4 quadrillion Btu, while Bahrain and Israel are much smaller producers, each contributing about 1 quadrillion Btu or less. 

This heavy dependence on oil and gas explains why markets react sharply to any disruption in the region.  

Oil: The backbone of West Asia

Oil remains the foundation of West Asia’s energy system. It powers transport, industry and daily life -- but also carries significant climate costs. 

According to the International Energy Agency (IEA), oil accounted for 41.5 per cent of West Asia’s total energy supply in 2023. The region’s total oil supply stood at 15,183,645 terajoules that year. 

Between 2000 and 2023, oil supply in the region increased by 70 per cent. West Asia accounted for 8 per cent of global oil supply in 2023, underlining its continued influence in global markets.

Crude oil production: A global pillar

Crude oil production is central to West Asia’s economic strength. Crude oil is extracted from wells located on land and offshore platforms. Once pumped, it is transported through pipelines or by tanker ships to refineries, where it is processed into petrol, diesel, jet fuel and industrial chemicals. 

According to the IEA, West Asia produced 58,390,269 terajoules of crude oil in 2023. Production has increased by 20 per cent between 2000 and 2023. 

The region accounted for 31 per cent of global crude oil production in 2023, highlighting its crucial role in the world’s energy system. In 2023, the share of domestic crude oil production stood at 239 per cent of total crude oil supply, showing the region’s strong export capacity.

Oil refining: From crude to daily essentials

Almost all crude oil must be refined before it can be used. During refining, crude oil is converted into fuels for cars, ships and aircraft, as well as heating fuels and industrial materials. 

Refineries also produce chemicals used in commercial and industrial activities. Many everyday products -- especially plastics -- are made from oil-based chemicals, making refining vital to modern manufacturing. 

In 2023, West Asia refined 18,182,954 terajoules of oil products. Refining activity has grown steadily, rising by 57 per cent between 2000 and 2023.