Energy and Midstream Implications From Attacks on Iran

Summary

• While Iran is a major oil producer and exporter, the greater concern for energy markets relates to the Strait of Hormuz.
• Roughly 20% of global petroleum demand and 20% of liquefied natural gas supply flow through the Strait.
• While the impact for midstream is fairly limited given fee-based business models, the impact on energy markets and commodity prices will heavily depend on the duration of the current situation and any damage to energy infrastructure in the region.

U.S. and Israeli strikes against Iran over the weekend have pushed oil prices to new relative highs, and the European benchmark for liquefied natural gas (LNG) is also spiking. While Iran is a sizable oil producer and exporter, the greater concern is the Strait of Hormuz, which acts as a major conduit of oil, LNG, refined products, and liquefied petroleum gases (propane and butane). This note discusses the implications for energy markets and North American energy infrastructure.

Iran and the Strait of Hormuz in Context

Iran’s oil production as of January was ~3.3 million barrels per day (MMBpd), which represents just over 3% of global demand. Exports from Iran have generally been between 1.5 and 2 MMBpd, the vast majority of which come from Kharg Island.

While Iran is a major producer and exporter, the greater concern for energy supplies is interruptions to flows through the Strait of Hormuz. In 2024, about 20% of global petroleum consumption flowed through the Strait. Per the U.S. Energy Information Administration, an estimated 2.6 MMBpd of output from Saudi Arabia and UAE could bypass the Strait if needed. This represents a very small portion of their combined output of 13.6 MMBpd based on January data. OPEC+ plans to bring an incremental 206,000 barrels per day to the market in April, though the actual addition could be limited given Saudi Arabia is the main country with excess capacity.

Another concern is destruction to energy infrastructure, which has appeared relatively limited so far but remains a wildcard. Saudi Aramco closed its 550,000-barrel-per-day Ras Tanura refinery on Monday. A contained fire was reported at the facility related to the interception of two drones. The refinery is Saudi Arabia’s largest and a key diesel producer.

For oil prices, geopolitical risk has certainly been in the driver’s seat this year. Most were cautious on prices heading into the year given oversupply concerns (read more). Instead WTI crude is up 23% year-to-date intraday as of March 2 and up over 5% intra-day alone. More relevant for global markets, Brent crude is up almost 27% this year and almost 6% on March 2. At writing, prices have already eased noticeably from where they were earlier in trading.

LNG Implications.

Approximately 20% of global LNG trade flows through the Strait, namely exports from Qatar. Qatar is the world’s second-largest LNG exporter. Following an Iranian drone strike, the massive Ras Laffan LNG facility was shut down. This single facility in Qatar represents about a fifth of global LNG supply. On Monday, the European LNG benchmark (Netherlands TTF) had spiked ~40%. Europe is likely more sensitive to LNG price moves given the need to refill inventories, which are estimated to be 10% lower than this time last year per Bloomberg.

Duration is the key question for energy markets.

For energy markets, the key question is how long the current situation lasts. If volumes can move through the Strait of Hormuz, the impact will likely be fairly transient. However, the Strait is effectively closed for now with vessels sitting on either side, and insurance becoming an issue as well. Destruction of energy assets in the area could also lead to a more prolonged impact. That said, the Trump Administration is likely focused on mitigating the impact to oil prices ahead of mid-term elections.

While not a great comparison, Brent oil prices rose almost $10 per barrel from June 12 to June 19 in conjunction with Israeli and U.S. attacks on Iran’s nuclear sites in June 2025. Brent had given up those gains by June 24 and fallen back below levels before the strike. No energy infrastructure was impacted then, though.

What does it all mean for midstream?

The overall impact for midstream is fairly limited. Companies in this space tend to transport and handle hydrocarbons in North America for fees, limiting their commodity price exposure. Liquefaction names Venture Global (VG) and Cheniere Energy (LNG) in the Alerian Midstream Energy Select Index (AMEI) could benefit from selling spot LNG cargos at higher market prices while they last. Cheniere’s volumes are largely contracted, with over 90% of its anticipated production tied to long-term agreements.

It is too premature to suggest that higher oil prices will lead to increased oil production activity in the U.S. Producers are broadly focused on capital discipline. Sustained higher prices could result in greater upstream activity on the margins, but U.S. producers will likely focus on maintaining or modestly growing their output.

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 AMEI is the underlying index for the Alerian Energy Infrastructure ETF (ENFR) and the ALPS Alerian Energy Infrastructure Portfolio (ALEFX).

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