From the Battle to Secure Supplies to Competition for Oil Market Share

The war on Iran, now entering its eighth month, has constituted one of the biggest shocks the global oil market has experienced in decades. After the fallout from the war and Iran's efforts to retaliate imposed a blockade on the Strait of Hormuz, through which roughly a fifth of global oil supplies used to pass, oil producers in the Persian Gulf, notably Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, were deprived of one of their most important export routes.

Although some producing countries turned to alternative routes to bypass the strait, oil exports from the Persian Gulf remained well below their pre-war levels for several months. However, average crude oil exports through the Strait of Hormuz have risen since late September and early this October to around 12 million barrels per day, equivalent to 80% of pre-war levels, according to Kpler, a firm specializing in ship tracking and commodity market data analysis.

When accounting for shipments passing through the Strait of Hormuz together with those exported via alternative routes, including the Saudi port of Yanbu on the Red Sea, through which around 4.5 million barrels per day are exported, and the UAE export hub of Fujairah, through which around 1.5 million barrels per day are exported, it becomes clear that Persian Gulf crude oil exports exceeded, on most days of the week ending October 3, their pre-war average of 18 million barrels per day, according to estimates by Kpler.

Accordingly, the global crude supply deficit is expected to shrink to 250,000 barrels per day in October, compared with around 4 million barrels per day last May, according to the consultancy Energy Aspects, a firm specializing in energy market and macroeconomic analysis.

Yet this improvement in supplies does not mean that shipping through the Strait of Hormuz has returned to its previous levels of safety, as Iran's Islamic Revolutionary Guard Corps continues to target vessels transiting this vital waterway. Over the past two weeks, roughly one tanker a day has come under attack, on the pretext that it crossed without coordinating with the Iranian authorities or took unauthorized routes.

By contrast, producing countries in the Gulf appear more willing to bear these risks, as well as rising shipping and insurance costs, in an effort to boost their exports and win back customers who were forced, during the period of disruption, to seek alternative suppliers. Charter rates for supertankers on the route stretching from the Persian Gulf to East Asia have climbed to around $1.4 million per day, an increase of nearly sixfold over pre-war levels, in addition to the extra costs associated with shuttle transport operations.

Paradoxically, benchmark Brent crude prices have remained above the $100-per-barrel mark, an increase of around 40% compared with pre-war levels, despite the rise in the cost of transporting a single barrel to between $15 and $20, and the continued escalation whose repercussions have spread from the Strait of Hormuz to the Bab el-Mandeb Strait and the Red Sea. Amid these developments, the oil market is gradually shifting from a battle to secure supplies to a new phase of competition to regain market share.

In earlier periods, competition for global oil market share intensified with the emergence of new sources of supply, as happened with the expansion of offshore exploration activities in the 1980s, and later with the shale oil revolution in the second decade of this millennium. Today, however, Gulf producing countries, led by Saudi Arabia, the UAE, Kuwait and Iraq, find themselves facing a different challenge, namely regaining the markets and shares they lost during the war on Iran, coinciding with the gradual recovery of shipping traffic through the Strait of Hormuz after months of disruptions and restrictions.

This shift comes after the oil market had been heading, before the outbreak of the war, toward a supply surplus in 2026, amid rising global reserves and expectations of falling prices, which portended intensifying competition among producers. However, drawdowns from inventories to cover supply shortfalls reshaped the market equation, increasing reliance on available volumes and making the restoration of Gulf supplies to their previous levels largely dependent on producers' ability to win back their customers and markets.

Although a struggle for market share usually leads to a sharp drop in crude oil prices, especially when producers resort to raising output to preserve their positions in the market, the rise in transport costs, tanker rates and insurance to record levels is keeping crude prices high and makes it unlikely that consumers will see a tangible decline in fuel prices at filling stations in the near term.

Yet the current competition does not merely threaten market balance, it also puts the cohesion of the Organization of the Petroleum Exporting Countries (OPEC) to a new test. The organization, which has faced disputes over production levels and market shares, suffered an additional blow in May 2026, when the United Arab Emirates withdrew from it, in a move linked to Abu Dhabi's drive to expand its production capacity and strengthen its ability to export larger volumes of oil.

This development confronts the organization's current and former members with the prospect of escalating competition for markets, at a time of growing need for coordination to avoid sharp price volatility. These developments raise fundamental questions about the ability of the organization, founded more than six decades ago and whose market-management efforts are led by Saudi Arabia, to overcome internal divisions and preserve its influence.

OPEC's effectiveness is not tied solely to the size of its members' reserves or their production capacity, but also depends on their ability to coordinate production policies and influence the global balance of supply and demand. If competition for shares turns into a race to increase production, the organization's ability to control prices could diminish, even as its members retain their weight in the global energy market.

In sum, competition among producing countries to maintain or regain their market shares may carry a positive aspect, if it helps increase supply and ease pressures on oil prices. Yet the most important effect lies in the extent to which this improvement passes through to markets for petroleum derivatives and refined products, helping curb the inflationary repercussions of rising fuel prices on transport and insurance costs and on the prices of goods and services. Restoring supplies does not necessarily mean price stability, unless shipping and insurance costs, along with the geopolitical risks that continue to weigh heavily on the global oil market, also recede.

Translated from Arabic with AI. Read it in Arabic