Could Middle East Conflict Break Energy Supply Chains? With Matthew Fitzsimmons

Why It Matters

The conflict threatens to delay billions in energy infrastructure, tightening global oil supply and reshaping investment flows toward more stable regions such as US shale, with direct consequences for prices and industry earnings.

Key Takeaways

• Middle East war threatens $110 bn of regional capex through 2028.
• Strait of Hormuz closure could cut 2027 FIDs from $35 bn to $10 bn.
• Offshore construction fleet (11% global) immobilized, limiting project execution.
• Steel and equipment imports, 1/3 from China, face severe transit disruptions.
• US‑centric oilfield service firms see price gains, while regional players decline.

Summary

The podcast examines how the escalating Middle East conflict is reshaping the oil‑field services and equipment sector. With the Strait of Hormuz effectively shut and Qatar’s offshore rigs idled, the region’s drilling activity is projected to fall 15‑20% in 2026, jeopardizing roughly $110 billion of capital spending slated through 2028 – about a quarter of global upstream investment.

Matthew Fitz‑Simmons highlights several pinch points: a third of the region’s $70 billion annual metal and equipment imports, largely sourced from China, face severe transit bottlenecks; 11% of the world’s offshore construction fleet, based in the Gulf, is grounded; and more than 20 million expatriate workers, many in Saudi Arabia, Qatar, UAE and Kuwait, confront travel restrictions that could stall project crews. These supply‑chain strains translate into delayed start‑ups, with 2027 forward‑looking FIDs potentially collapsing from $35 bn to $10 bn if the strait remains closed.

Specific projects cited include the Northfield expansion, Aramco’s Marjan and Zuluf offshore upgrades, and Kuwait‑Iraq pre‑FID assets, all at risk of postponement or deferral. While regional oil‑field service firms such as SLB and Halliburton have seen their shares tumble, US‑centric players like Patterson‑UTI and Proact have rallied 30% and 17% month‑on‑month, reflecting market bets on increased US shale output to fill the anticipated 9.4 million‑barrel daily shortfall.

The broader implication is a reshuffling of capital and cash‑flow expectations across the global energy value chain. Investors must weigh heightened geopolitical risk against the upside of US shale‑driven demand, while operators grapple with material shortages, labor constraints, and the prospect of prolonged project delays that could reverberate through oil prices and downstream supply for years to come.

Original Description

When this episode was recorded at 3:00 pm CET on Monday, 16 March, the conflict in the Middle East was now entering its third week. At Rystad Energy, our thoughts remain with our colleagues, clients and everyone in the region who is directly impacted by the conflict.

Let’s Talk Energy and try to understand how the oilfield services and equipment sector is coping with the conflict. Ongoing military strikes and the de facto closure of the Strait of Hormuz have not only cut supplies of oil and natural gas but also disrupted the flow of goods and services needed to keep the oil and gas industry working. At the same time, energy infrastructure, which had been spared from major damage in the early days of the conflict is increasingly being hit by airstrikes by both sides. The situation only threatens current and future projects in the region but is also pushing up prices in the Middle East and around the world.

+ What is the current status of key energy infrastructure in the region and what is the outlook for bringing idled or damaged facilities back online?

+ Where do we see the biggest pinch points in the supply chain and where will those shortages create the most acute impacts?

+ What does all this mean for the amount of time and the cost needed to maintain global supplies of oil, natural gas and other fuels?

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Further Analysis :

- Gulf shut-ins could reduce regional crude output by 70% if US-Iran war drags on (accessible to non-clients): https://www.rystadenergy.com/news/gulf-shut-ins-could-reduce-regional-crude-output-by-70percent-if-us-iran-war-drag

- Special report #2- Middle East conflict implications (accessible to non-clients): https://www.rystadenergy.com/insights/middle-east-conflict-report2

- Special report - Middle East conflict implications (accessible to non-clients): https://www.rystadenergy.com/insights/middle-east-conflict-implications

- Gulf conflict puts upstream capex – and contractor performance – at risk (clients only): https://portal.rystadenergy.com/article-detail/693393?qid=37c50390f89648caa4eb9e58d761dbd6&oid=doc_693393

- Qatar offshore rig suspensions signal growing Iranian strike threat in Gulf (clients only): https://portal.rystadenergy.com/article-detail/694065?qid=cc907b7b6ff06a2c59c80ec0652b2dcf&oid=doc_694065

- Middle East conflict could lift offshore spending and cost pressures (clients only): https://portal.rystadenergy.com/article-detail/694029

- Oilfield service stocks fall as markets price in geopolitical risk (clients only): https://portal.rystadenergy.com/article-detail/693889?qid=cd2613ba06209f80c850d0f9f7818a6e&oid=doc_693889

- Middle East war to push OCTG & line pipe prices higher (clients only): https://portal.rystadenergy.com/article-detail/693835?qid=de83973f45b133b3ff2bdcf10d7fabdd&oid=doc_693835

- Labor availability constrained following Middle East attacks (clients only): https://portal.rystadenergy.com/article-detail/693411?qid=37c50390f89648caa4eb9e58d761dbd6&oid=doc_693411

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Related Episodes

- Middle East escalation and the scramble for LNG, with Sindre Knutsson https://www.rystadenergy.com/podcasts/middle-east-escalation-and-scramble-of-lng

- How will Middle East conflict impact energy and the economy? With Rystad Energy Chief Economist Claudio Galimberti https://www.rystadenergy.com/podcasts/how-will-middle-east-conflict-impact-energy-and-the-economy

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🎙️Let’s Talk Energy is a Rystad Energy Production.

Produced by: Laura Rodriguez Skaug & Både Og.

Executive producers: Noah Brenner, Elliot Busby, Evodie Fleury-Greaker & Erik Means.

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