Lubricants Market Supply Crisis Amid Iran Conflict

Iran Conflict Drives Global Lubricants Supply Crisis as Crude Oil Tops $100 

NEW YORK, United States — July 24, 2026 — The global lubricants market is confronting an unprecedented supply crisis as crude oil prices surged above $100 per barrel on Friday following Iran's rejection of a U.S. cease-fire proposal, compounding base oil shortages that industry leaders warn could persist well into 2027. 

Main Development 

The escalating Middle East conflict has effectively closed the Strait of Hormuz — a conduit for approximately 20% of the world's pre-war oil supply — triggering a cascading disruption across the global lubricants supply chain. Base oil prices have roughly doubled since the conflict began in February 2026, with multiple suppliers declaring force majeure and placing customers on allocation. 

The Independent Lubricant Manufacturers Association (ILMA) has formally engaged the U.S. Department of Energy (DOE) to address the severity of the situation, warning that approximately 44% of U.S. Group III base oil demand — critical for high-performance lubricants — is typically sourced from the Persian Gulf, a supply now largely offline. 

Damage to Shell's Pearl GTL facility in Qatar, caused by Iranian rocket strikes, has halted production of approximately 30,000 barrels per day of Group III base oil, with repairs expected to take at least one year. Additional disruptions stem from force majeure declarations by producers in Bahrain and the UAE, including Penthol's declaration on its ADNOC base oil supply, citing the Iran conflict and continuing production disruptions. 

In Asia, Japanese lubricant manufacturers continue to limit supply while the country accelerates development of synthetic alternatives. Japan imports more than 90% of its crude oil from the Middle East, and alternative procurement reached approximately 80% of year-earlier levels in June 2026, according to Japan's 10th Ministerial Meeting on the Middle East Situation. 

Domestically, new Group III capacity under development by Chevron and ExxonMobil will not come online until 2027, leaving North American producers unable to offset lost volumes in the near term. ILMA has also sought emergency provisional licensing relief from the American Petroleum Institute (API) to allow lubricant manufacturers temporary formulation flexibility during the crisis. 

Key Highlights: 

• Crude oil prices surpassed $100 per barrel on July 24, 2026, rising approximately 28% in July alone, as Iran rejected U.S. cease-fire proposals and hostilities escalated 

• Approximately 44% of U.S. Group III base oil demand — essential for high-performance lubricants — is typically sourced from the Persian Gulf, now largely offline due to the Strait of Hormuz closure 

• Shell's Pearl GTL facility in Qatar, a key source of approximately 30,000 barrels per day of Group III base oil, remains offline following Iranian rocket strikes, with repairs expected to take at least one year 

• ILMA has engaged the U.S. Department of Energy and sought emergency provisional licensing relief from API, allowing lubricant manufacturers temporary formulation flexibility during the supply crisis 

Analyst Insight: 

According to analysts at Next Move Strategy Consulting, the ongoing Middle East conflict represents a structural inflection point for the global lubricants market is projected to reach USD 174.74 billion by 2030. NMSC analysts note that the supply disruption is accelerating a strategic pivot toward synthetic and bio-based lubricants, as manufacturers seek to reduce dependence on Persian Gulf-sourced base oils. The analysts caution that downstream sectors — including transportation, agriculture, defense, and industrial manufacturing — face the most acute near-term risks, with sustained pricing pressure and supply constraints expected through at least 2027. 

Industry Outlook: 

The global lubricants industry faces a prolonged period of supply constraint and elevated input costs as the Middle East conflict continues to disrupt base oil production and logistics. While new domestic Group III capacity is expected to come online in 2027, near-term relief remains limited. Industry stakeholders are increasingly prioritizing supply chain diversification, synthetic lubricant development, and regulatory flexibility to navigate the crisis. The normalization of Strait of Hormuz transits remains the critical variable for market stabilization, with a Reuters poll of analysts projecting the oil market to shift to a surplus of 1.9 million barrels per day in 2027, contingent on improved Hormuz flows. 

Source: New York Times 

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Prepared By: Sanyukta Deb