Where Oil Meets Geopolitics
As most of you know, the Middle East is witnessing a historic conflict following the attack on Iran by US and Israeli forces yesterday. Iran has retaliated with missile strikes across the Gulf region and on Israel. US military assets near the Straits of Hormuz and Iraq are under pressure. At the same time, the US and Israel are systematically targeting the Iranian leadership – killing Supreme Leader Ayatollah Khamenei and decapitating large elements of the Iranian Revolutionary Guard Council. The situation is fluid, and it’s impossible to predict what will happen next. Suffice to say, the conflict may last for a protracted period, and we should expect turbulence in energy markets, and by extension, in global capital markets.
Key Oil Stats
Chart 1: Middle East Core Producers
Production + Global Share + Reserves
| Country | Crude Production (Mbpd) | % of World Production | Proven Reserves (Bn bbl) |
|---|---|---|---|
| Saudi Arabia | ~10.9 | ~11% | ~266 |
| Iran | ~5.0 | ~5% | ~209 |
| Iraq | ~4.4 | ~4.5% | ~145 |
| UAE | ~4.0 | ~4% | ~113 |
| Kuwait | ~2.8 | ~3% | ~102 |
| Qatar | ~1.4 | ~1.5% | ~25 |
| Oman | ~1.0 | ~1% | ~5.4 |
| Bahrain | ~0.2 | ~0.2% | ~0.17 |
Figures represent approximate 2023–2024 production levels, global share estimates, and proved reserves.
In short, supply disruption could affect about 30% of the world’s daily crude output.
An equally important issue is the security of the world’s oil fields and related infrastructure in a resource-rich region. See the table below: About 52% of the world’s proven reserves are held by the top five Middle Eastern oil-producing countries.
Chart 2: Reserve Concentration
| Country | Share of Global Proven Reserves (approx.) |
|---|---|
| Saudi Arabia | ~17% |
| Iran | ~13% |
| Iraq | ~9% |
| UAE | ~7% |
| Kuwait | ~6% |
Shares are calculated using country-level proved reserves divided by total global proved reserves. Estimates may vary by source and reporting methodology.
Chart 3: Reserve-to-Production Ratio (Years of Supply)
This tells you how long each country could keep producing at current rates. Some countries maximize output. Others preserve optionality. The ratio reflects strategy as much as geology.
| Country | Proven Reserves (Bn bbl) | Production (Mbpd) | R/P Ratio (Years) |
|---|---|---|---|
| Saudi Arabia | 266 | 10.9 | ~67 yrs |
| Iran | 209 | ~5.0 | ~115 yrs |
| Iraq | 145 | ~4.4 | ~90 yrs |
| UAE | 113 | ~4.0 | ~77 yrs |
| Kuwait | 102 | ~2.8 | ~100 yrs |
| Qatar | 25 | ~1.4 | ~49 yrs |
| Oman | 5.4 | ~1.0 | ~15 yrs |
| Bahrain | 0.17 | ~0.2 |
R/P ratios are calculated as: proved reserves ÷ (daily production × 365). Production figures represent recent annual averages and may not reflect future output levels.
The Middle East is an attractive place for exploration and production because oil is easy to extract. True, the US has large reserves, but production costs are much higher.
Chart 4: Cost of Oil Production
| Country | Production Cost ($/bbl) |
|---|---|
| Saudi Arabia | ~$10 |
| Iraq | ~$10 to $15 (supergiant fields) |
| Iran | ~$10 to $20 |
| Kuwait | ~$8 to $12 |
| UAE | ~$10 to $15 |
| Qatar | ~$15 to $20 |
| Oman | ~$25 to $30 (EOR heavy) |
| Bahrain | ~$40+ |
For context: US shale breakeven ~ $46–60. So, even “expensive” Oman remains competitive globally.
The Middle East doesn’t just have large reserves. It has some of the cheapest oil to produce in the world, giving it a structural advantage in global energy markets.
Conclusions
The reality is that the longer the war goes on, the longer the potential for turmoil in both the energy and financial markets. Geopolitics is a fact of life and, by its very nature, unpredictable.
As far as clients are concerned, we would like to convey that we have a genuine “quality bias” across our strategies, which helps protect capital in uncertain times. The most desirable action at this juncture is to stay calm and not panic. Volatility is part and parcel of investing, and we are laser-focused on protecting client capital from the worst outcomes.
Sources:
S. Energy Information Administration (EIA), International Energy Statistics – Petroleum and Other Liquids Production:
https://www.eia.gov/international/data/world/petroleum-and-other-liquids/production
S. Energy Information Administration (EIA), World Petroleum and Other Liquids Supply:
https://www.eia.gov/international/data/world/petroleum-and-other-liquids/summary
Energy Institute, Statistical Review of World Energy 2024 – Oil (Reserves and Production):
https://www.energyinst.org/statistical-review
S. Energy Information Administration (EIA), Country Analysis Briefs (Saudi Arabia, Iraq, Iran, UAE, Kuwait, Qatar, Oman, Bahrain):
https://www.eia.gov/international/analysis/country
Rystad Energy, Global Upstream Cost Curve / Breakeven Analysis (summarized in industry comparisons):
https://en.wikipedia.org/wiki/Price_of_oil#Comparative_cost_of_production
National Bureau of Economic Research (NBER), Limits on OPEC Output Increase Global Oil Production Costs:
https://www.nber.org/digest/jan18/limits-opec-output-increase-global-oil-production-costs
