Even as Iran tightens its grip on global energy flows by capturing the Strait of Hormuz, its own oil sector is under increasing pressure from the US naval blockade. With no way to export the oil it pumps and dwindling storage space at home, Iran may be forced to dramatically cut or stop production from some of its wells, possibly as soon as two weeks, the AP said, citing experts.
The situation may not be as dire as US President Donald Trump recently suggested when he warned that the pipeline could start exploding within days. However, if production stops, resuming production from Iran’s aging oil wells could prove difficult, if not impossible, potentially damaging its long-term oil capacity.
Read also | Iran is trying to find a solution to the US blockade, which it cannot break
Analysts say Iran has already started cutting production to avoid a complete shutdown. The pressure is mounting as the US Treasury tightens sanctions targeting supplies of Iranian oil already in transit. At the same time, the US military detained at least two tankers off the coast of Asia suspected of transporting Iranian oil.
With limited oil exports, Iran receives less foreign currency, further straining an economy already battered by war, unrest and long-standing sanctions. At the same time, reduced tanker traffic amplifies the impact of disruptions in the Strait of Hormuz and worsens supply constraints, AP reported.
As a result, aviation fuel shortages are emerging and gasoline prices are rising worldwide as global energy markets feel pressured by limited oil flows.
Here’s what the experts say
Iranian leaders are “really resisting” shutting down oil wells because it would be painful in the long run, said Miad Maleki, a former US Treasury sanctions expert who is now a senior fellow at the Washington-based Foundation for Defense of Democracies.
Read also | OPEC oil production shifts as UAE exits amid Iran war – what it means
“They have been under sanctions, they have been isolated for 47 years. These oil wells are not well maintained. Their machinery is not well maintained,” Maleki said. Once shut off, he added, the wells don’t easily “get stuck” after a few months.
The pressure on Iran is increasing
Before the war, Iran produced more than 3 million barrels of oil a day, with slightly more than half consumed domestically. However, since the US blockade began on April 13, tankers have been loaded with oil but remain unable to leave, leaving shipments essentially stranded, the AP reports.
“It looks like there’s been a significant slowdown in production,” said Antoine Halff, co-founder and principal analyst at Kayrros, an environmental research firm that tracks emissions and energy supply chains. He pointed to signs that supplies were not being replenished as quickly as usual on Kharg Island, Iran’s main oil export terminal in the Persian Gulf.
Iran likely stores some of its oil in tankers located around Kharg Island, Halff noted.
According to commodities tracker Kpler, Iran still has limited capacity to store additional oil, enough for about 12 to 22 days of production, even after output cuts.
Read also | US General Dan Caine told a Senate hearing that Putin was aiding Iran’s war effort
“While the immediate impact on earnings is limited, operational constraints are now forcing production restrictions and setting a delayed but significant financial constraint,” wrote Homayoun Falakshahi, an analyst at Kpler.
Wood Mackenzie, another oil analysis firm, estimates that Iran will run out of storage capacity in about three weeks.
“If the blockade persists, cuts will become inevitable,” wrote Alexandre Araman of Wood Mackenzie. Shutdowns lasting more than a month “risk long-term damage” to Iran’s oil reservoirs, he wrote, adding that recovery of older fields “remains uncertain.”
Iran’s oil industry has long been a precarious lifeline
Since 1908, when oil was first discovered in Iran, the country’s energy sector has been deeply tied to regional politics. Efforts to nationalize its oil industry and take control of British interests led to a CIA-backed coup in 1953 that strengthened the government of Shah Mohammad Reza Pahlavi. The event also set the stage for the 1979 Islamic Revolution, which eventually toppled the Shah, AP reported.
During the revolution, strikes by oil workers sharply reduced production, reducing it from about 6 million barrels a day to about 1.5 million.
Iran’s oil industry never recovered and faced decades of international sanctions during which its infrastructure aged and withered.
In his first term, Trump waged a “maximum pressure” campaign and increased sanctions to severely reduce Iran’s oil exports. Forced to store oil in tankers at sea, the Iranian government lost tens of billions of dollars in revenue. Still, the pressure failed to force Tehran to sign a nuclear deal with the US, the AP reported.
Now Iran faces a combination of increased sanctions and a blockade. Trump declared on Tuesday that Iran was “in a ‘state of collapse.’
US Treasury Secretary Scott Bessent piled on, writing on X: “Iran’s creaking oil industry begins to shut down production thanks to US BLOCKADE. Pumping to collapse soon. GASOLINE SHORTAGE IN IRAN NEXT!”
There were no immediate signs of gasoline shortages in Iran. But Iran appears to be indirectly acknowledging some of the pain.
Read also | US shoots down 4 drones launched from Houthi-controlled areas, CENTCOM says
A segment on state television, run by hardliners, featured journalists discussing the possibility of an oil storage crisis. One noted that if empty tankers are blocked from returning to Iran, “we won’t be able to export.” Oil Minister Mohsen Paknejad on Monday praised the oil terminal’s staff for their “continuous perseverance”.
Maleki, an analyst at the Foundation for the Defense of Democracies, said if the blockade continues and production slows or stops further, oil workers could lose their jobs, sparking new unrest.
If the blockade continues and production slows or stops further, oil workers could lose their jobs, sparking new unrest.
“In 1979, when the oil industry was disrupted, in the Iraq war in the 1980s … you can go and see how effective they were in putting real pressure on the regime,” he said. “It will really affect some of the most strategic provinces in Iran and the most strategic industries.”
