One of the most striking features of the Iran war has been the stability of the global oil market. Despite the disruption of flows through the Strait of Hormuz, the world’s most important oil transit point, prices have generally hovered around $100 a barrel – a record low than many observers had waited.
A major reason for this resilience is the growing importance of oil production in America. Even money warInternational Energy Agency ESTIMATED that almost all of the global increase in oil demand in 2026 could be met by increased supply from North and South American countries such as the US, Canada, Brazil, Guyana and Argentina.
At the time, the OPEC oil cartel was also preparing to increase output, raising expectations for a period of oversupply and weak prices. The war changed that picture dramatically. The Hormuz shutdown has removed up to 14 million barrels per day from the market. higher push prices and fueling large global stock pullbacks instead of the expected stock rally.
However, high prices are often the best cure for shortages. Oil producers across America have responded to the outage by increasing production and exports. In the US, crude exports rose to a record 6.44 million barrels per day in April. It is also adding new export infrastructure, with nearly 800,000 barrels per day additional dock capacity will come online in 2026.
Meanwhile, Brazil has added eight new floating offshore oil production vessels in recent years, with a combined capacity approaching 1.5 million barrels per day. Its oil production is also expected to increase significantly in 2026.
Petrobras, Brazil’s state-owned oil company, recently launched a new production project on one of these ships in the field of Búzios off the coast of Rio de Janeiro. Production began five months ahead of schedule, in part to take advantage of elevated global prices.
Elsewhere in South America, Guyana has emerged as one of the fastest growing oil producers in the world. Guyanese oil production has already reached about 900,000 barrels per day and it can almost be doubled until the end of the decade. Even Venezuela, long associated with the drop in oil production and the economic crisis, has significant increase in exports in response to higher prices.
Taken together, America is expected to produce about 30 million barrels of oil a day later in 2026, approaching pre-war OPEC production levels. The US alone remains the world’s largest producer, with total production of liquid hydrocarbons reaching approx 22 million barrels one day in April.
OPEC helped create this boom
This increase in Western Hemisphere production did not occur in isolation. Ironically, it was helped by OPEC itself. For years, OPEC’s de facto leader, Saudi Arabia, and its partners curbed oil production to support higher prices. These elevated prices helped make more expensive projects in the Americas commercially viable, especially US shale production.
Saudi Arabia’s strategy of “higher for longer” prices was driven in part by domestic economic ambitions. To finance projects related to its economic diversification plans, including the major development of the new city of Neom, the Saudis oil prices are needed at least $90 per barrel. The result has been a powerful incentive for non-OPEC producers to expand.
However, regardless of this moment, announcing a permanent shift in the oil center of gravity away from the Middle East would be premature. Production economy still strongly favor Gulf producers, with oil extraction costs in the Gulf remaining among the lowest in the world.
In some areas, Saudi Arabia and neighboring producers may extract oil for less than $10 per barrel. Across the wider Gulf region, average production costs are estimated at around $27 per barrel. In contrast, most of North America’s clay production requires the convergence of prices between $50 and $65 per barrel to remain profitable.
This difference is extremely important during periods of lower prices. If markets weaken again, America’s highest-cost producers would be the first to come under pressure. Gulf producers, with large reserves and extremely low costs, will probably be able to resist them.
Geography also favors the Middle East in many key markets. For growing Asian economies such as India, Pakistan and Bangladesh, importing oil from the nearby Gulf remains the cheapest option.
Many Asian refineries are specifically designed to process Middle Eastern crudes, which are rich in middle distillates like diesel and jet fuel – the hydrocarbons that typically drive economic development. Most of the shale oil exported from the US is lighter and less suitable as a direct substitute.
At the same time, the producers of the Gulf they are investing a lot to protect their long-term role in global energy markets. The United Arab Emirates is expansion of pipeline infrastructure that bypasses the Strait of Hormuz, including upgrading its Habshan-Fujairah pipeline.
And Saudi Arabia already operates its own vast East-West pipeline, which is capable of transporting 7 million barrels of oil per day to the Red Sea. These projects are designed to reduce vulnerability to regional instability and provide export routes for decades to come.
America is unquestionably transforming the global oil market. The region is now effectively what is known as a swing producer, offering some flexibility during supply crises and geopolitical shocks.
But long-term dominance in oil markets is determined not only by production volumes. Cost, geography, infrastructure and reserve size also matter. By these measures, the Middle East still has a tremendous advantage.
As long as the world continues to consume large volumes of oil, the Gulf is likely to remain the industry’s main production and export center – even if America is becoming an increasingly important source of crude oil.
Adi Imsirovic is a lecturer in energy systems, University of Oxford
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