Restoring a significant portion of oil and gas production lost to war damage in the Persian Gulf could take as long as two years, International Energy Agency (IEA) Executive Director Fatih Birol has warned — a timeline that stands in sharp contrast to how financial markets appear to be pricing the disruption.
Scale of the Damage
The conflict has left oil fields, refineries, and pipelines across the Persian Gulf severely damaged. The Strait of Hormuz, a critical chokepoint for global crude exports, has been largely closed, cutting off one of the world's most important energy corridors. According to earlier IEA estimates, the war has already removed as much as 13 million barrels per day of oil production from global supply. When refined products are included, total export losses climb even higher, with more than 80 energy facilities across the region reported to have sustained damage.
Reopening the Strait Is Not Enough
Speaking on Bloomberg's Wall Street Week, Birol cautioned against assuming that supply would bounce back quickly once shipping lanes reopen. Resuming transit through the Strait of Hormuz alone would not be sufficient to restore production to pre-war levels, he argued. Damaged infrastructure would first need to be repaired and output progressively restarted — a process that takes considerable time and investment.
Natural gas infrastructure faces an even longer road to recovery. Some liquefied natural gas (LNG) terminals that sustained damage may require more than two years before returning to normal operating capacity.
Markets Already Feeling the Strain
The effects of the supply shock are increasingly visible in physical commodity markets. Spot crude prices for immediate delivery have surged, with some barrels reportedly trading near $150. Refiners across Europe and Asia are competing for a shrinking pool of available supply, with some operators already beginning to cut processing runs as shortages take hold.
Birol also flagged early indicators of demand destruction in response to the price pressures. These include fuel rationing in certain markets, reduced industrial activity, and mounting inflation in energy-importing economies.
Emerging Markets Face the Hardest Hit
The burden of the supply crunch is expected to fall disproportionately on developing economies. Nations across Asia and Africa, which depend heavily on imported energy, are seen as especially vulnerable to sustained high prices and reduced availability.
The IEA has warned that markets are still treating the disruption as temporary — a view that may not reflect the structural damage now embedded in regional energy infrastructure.
What Comes Next
With the IEA projecting a multi-year recovery timeline and physical markets already under severe stress, attention is now turning to how governments and international bodies will respond. The combination of infrastructure damage, curtailed shipping, and rising demand destruction points to a prolonged period of energy market instability, with consequences extending well beyond the immediate region.
