When the mechanics of an an oil well stops, the countdown begins. There is a small window until it collapses - and once it collapses, it is useless. Permanently. Any oil in that well goes untouched for a very, very long time.
Trump's US Navy blockade of Iranian ports began April 13 cutting off 90% of Iran's economy at $400 million per day as 23 ships were intercepted and Iran closed the Strait of Hormuz again with oil infrastructure facing permanent damage by April 26.
That means no oil can be drilled - their storage tanks are full, ships cannot load up in the Iran ports, so the oil wells will have to be shut down soon, if not already.
OUR THOUGHTS…
What Happens to an Oil Well That Has Been Shut Down?
Shutting in an oil well, which means temporarily stopping its production by closing surface valves and chokes, is a complex operation that can lead to various problems when attempting to restart the well.
This process is not like simply turning off a faucet, and the well is not guaranteed to return to its previous production rate when reopened.
One significant risk is a reduction in pressure within the oil formation, often due to water ingress, which can permanently damage the oil field and reduce future output.
Additionally, methane hydrates can form and clog pipes, especially in underwater pipelines, and crossflow between high and low-pressure zones can mix different gases, oils, and waters, creating difficult-to-remove problems.
Corrosion can also occur in wells that are shut in for extended periods.
Because of these potential issues, restarting a well after it has been shut in can be expensive and mechanically challenging, sometimes requiring months of work, and in some cases, the well may never fully recover its original production capacity.
Companies consider the cost and difficulty of restoring wells to pre-curtailment volumes when deciding whether to shut them in, as it is generally an option they try to avoid.
Shutting in wells can lead to permanent damage and reduced future production…
When a well is shut down, water can enter the formation, reducing pressure and leading to a much lower production rate when the well is restarted, potentially causing permanent damage to oil fields.
Shutting in wells is not like turning off a faucet; it risks damaging the well, and when restarted, less oil may come out due to insufficient pressure.
The immediate consequence of shutting down oil production is a loss of revenue, which can have a massive impact on an economy reliant on oil exports.
Uncertainty remains regarding the long-term effects of shutting in wells…
It is not definitively known what happens to a shale well when it is turned off for several months or longer, raising questions about whether oil will flow freely again or if production will significantly decrease when restarted.
There is a lack of clear evidence about the most likely effects of shut-ins on production, leading to uncertainty about whether wells will recover quickly or if many will need to be plugged, abandoned, and new wells drilled.
Some operators believe that some older wells may be difficult to reopen, but most wells should be able to restart over time, potentially acting as temporary storage in the ground.
The Impact to Iran? To Oil Prices? Should Iran Find Itself In a Lesser Place?
Markets are finicky to unsettled times - the price of oil will settle down eventually but not after a time of nervousness, which means inflated prices.
Eventually, it will become evident that the world can go on without oil from Iran but how that looks will be entirely up to the rehashing of political relationships.
China, a primary importer of Iranian oil, would likely seek alternative sources, with Russia being a prominent option.
In 2025, Iran exported 520 million barrels of crude oil to China, and over 90% of Iran's oil currently goes to China, primarily to independent refineries in Shandong province.
China has already been increasing its imports of Russian oil in exchange for Iranian oil prior to the current conflict.
Countries like Saudi Arabia and the United States could also provide oil to China, though at market prices, which are more expensive than the discounted sanctioned oil China previously received from Iran.
China has also been actively diversifying its energy imports and expanding reserves in response to global disruptions, and has a significant amount of crude held in storage
