US-Iran war weakens OPEC+ grip on oil market as supply disruptions limit influence

Six months into the Iran war, OPEC+ is grappling with a diminished ability to influence oil prices as prolonged supply disruptions and the closure of key export routes erode the group’s market power.

The conflict has shut down the Strait of Hormuz, a critical artery for crude exports from major Gulf producers, while also damaging energy infrastructure across several OPEC member states.

The disruptions have significantly reduced the alliance’s share of global oil production and weakened the impact of its production policy decisions on the market.

Instead of OPEC+ output targets driving prices, analysts say falling crude imports by China have become one of the biggest factors shaping the oil market in 2026, helping offset the effects of what is being described as the largest supply disruption in the industry’s history.

According to Reuters calculations based on data from the International Energy Agency (IEA), OPEC+ accounted for about 40 per cent of global oil production in July, down from more than 48 per cent before the United States and Israel launched attacks on Iran in late February.

Part of the decline followed the United Arab Emirates’ withdrawal from OPEC in May, which accounted for roughly four to five percentage points of the drop.

The alliance’s seven core producers, including Saudi Arabia and Russia, represented only about one-quarter of global oil output in July, highlighting the extent to which the group’s influence has waned.

The prolonged closure of the Strait of Hormuz has further constrained OPEC+’s ability to adjust supplies. The waterway serves as the main export route for leading producers such as Saudi Arabia, Iraq and Kuwait, making it difficult for the alliance to implement announced production increases.

Oil prices near two-week low as Iran tensions drop

Founded in 1960, OPEC expanded into OPEC+ in 2016 after Russia and several other oil-producing nations joined the group to help strengthen its influence amid growing competition from non-OPEC producers.

OPEC’s share of global crude production peaked at around 50 per cent during the oil crises of the 1970s before declining sharply in the following decade as production expanded in regions such as the North Sea, Alaska, and Siberia.

The organisation maintains that its production decisions are aimed at ensuring market stability rather than targeting a specific oil price.

Although OPEC has faced supply disruptions during previous conflicts – including the 1990–91 Gulf War and the 2003 invasion of Iraq – the current crisis is unprecedented because it has simultaneously affected several major producers, limiting the group’s ability to compensate for lost output.

Since March, OPEC+’s core producers have announced six separate production increases. However, most of those planned output hikes have remained largely unrealised due to the continued disruption of exports through the Strait of Hormuz.

The only notable market reaction came in July during a brief ceasefire between the United States and Iran, when hopes of the strait reopening temporarily eased supply concerns and influenced oil prices.