The world’s most important oil chokepoint is effectively closed. The Strait of Hormuz, the narrow waterway through which a fifth of global petroleum flows every day, has ground to a near-complete halt. Tankers aren’t crossing. Insurers won’t cover the risk. Ten days into the US-Israel war on Iran, there is no serious off-ramp in sight.
Brent crude, the global benchmark, surged to as high as $119.50 per barrel Monday morning before pulling back to trade above $101, a gain of roughly 9% on the day. That’s up from around $70 per barrel before the conflict erupted, a move of more than 40% in under two weeks. It marks the first time oil has reached $100 since Russia’s 2022 invasion of Ukraine, when geopolitical risk collided with a surging post-COVID demand surge.
This time, it’s not just risk. The physical supply is actually gone.
The Strait Of Hormuz Is Closed, And That’s The Whole Ballgame
Iran hasn’t built a physical wall across the sea. It doesn’t need to. Cheap drones and the credible threat of attack on vessels have pushed most tanker operators to anchor at the waterway’s edge rather than risk the crossing. The result is functionally identical to a full blockade.
The Iran war has disrupted 20% of global oil supply for nine days and counting, according to Rapidan Energy Group, more than double the previous record set during the Suez Crisis of 1956-57, which disrupted just under 10%. That’s not a statistic you tuck away in a footnote. That’s a structural shock to the global economy.
The near-complete shutdown of the strait means the region’s top oil producers, Saudi Arabia, the UAE, Iraq and Kuwait, have had to suspend shipments of hundreds of millions of barrels. Oilfields are filling their storage capacity, and producers in Iraq and Kuwait have already begun cutting output. The UAE is expected to follow. When you can’t move the product, eventually you stop making it.
This is not a drill. This is the scenario energy analysts and Pentagon war-gamers have spent decades hoping would never actually materialize.
$150 Oil Is Now A Baseline Scenario, Not A Worst Case
The projections coming out of the major financial institutions are not reassuring. Oil could rise to $150 a barrel by the end of March if travel through the strait doesn’t resume, according to Homayoun Falakshahi, lead crude research analyst at Kpler. Goldman Sachs has warned that if disruptions persist, Brent could test $120 in the near term. JP Morgan analysts noted that “the market is shifting from pricing pure geopolitical risk to grappling with tangible operational disruption.”
Lurking above all of that: Iran’s Revolutionary Guard Corps has warned that ongoing strikes on Iranian energy infrastructure could send global oil prices above $200 per barrel. The IRGC has every incentive to threaten the unthinkable, and right now, the unthinkable is closer to the market’s base case than it was two weeks ago.
Qatar declared force majeure on its LNG export commitments after Iranian drone attacks on its facilities. Qatar supplies roughly 20% of global liquefied natural gas. Saudi Aramco’s Ras Tanura refinery and crude export terminal, one of the largest in the world, has also been shuttered following attacks, with no clear timeline for return. The conflict is metastasizing beyond Iran’s borders in ways that compound every supply calculation.
At The Pump, It’s Already Real
Abstract commodity markets have a way of landing very concretely at the gas station. The price tracker GasBuddy reported Monday that the average price of gas in the US has risen by 51 cents per gallon over the last week alone, with the national average now sitting around $3.48. Analysts expect that to climb fast.
Gregory Brew, a senior analyst on Iran and oil at the Eurasia Group, projected the US will see $3.50 to $4 gasoline by next week and $5 diesel this week. That kind of move doesn’t stay in the energy sector. It bleeds into freight costs, food prices, airline fares, and ultimately consumer confidence, which is already on shaky ground heading into a midterm election year.
Trump, for his part, is not particularly concerned. He posted to Truth Social over the weekend that short-term oil prices “will drop rapidly when the destruction of the Iran nuclear threat is over” and called it a “very small price to pay.” Markets did not share his equanimity. Stocks continued to fall.
Asia Is Getting Hit The Hardest
If you want to understand who has the most to lose from a sustained Strait of Hormuz closure, look east. Japan’s Nikkei 225 fell more than 5% Monday, South Korea’s KOSPI dropped 6%, and Hong Kong’s Hang Seng Index declined as well. European stocks also opened lower, with the FTSE 100 and Frankfurt’s DAX both in the red.
Iran exports roughly 1.6 million barrels of oil a day, mostly to China, which has publicly called for an immediate end to the fighting. Beijing isn’t calling for peace out of moral conviction. It’s calling for peace because its refineries need Gulf oil to keep running, and the alternative, scrambling for replacement supplies in a suddenly very tight market, is not a good option. South Korea’s president has already warned refiners against price gouging and hoarding, a sign of how rattled Asian governments are by the speed of this shock.
The aviation industry is absorbing collateral damage too. Jet fuel prices are rising faster than crude, hitting carriers particularly hard. Gulf-based airlines like Emirates, Qatar Airways, and Etihad, which normally handle roughly a third of Europe-to-Asia passenger traffic, are facing deepening disruptions as airspace closures and fuel cost spikes compound simultaneously.
The Macro Picture: Stagflation Risk Is Back
The economic math is straightforward and unpleasant. The IMF has estimated that every sustained 10% rise in oil prices results in a 0.4% rise in inflation and a 0.15% reduction in global economic growth. Oil is up 40-50% in under two weeks. Do the arithmetic.
Former Fed Chair Janet Yellen has already flagged the risk: depending on how long this drags on, the oil shock could wipe out the progress made on inflation and make the Federal Reserve’s job dramatically harder. Rate cuts that markets were pricing in for 2026 are suddenly a lot less certain. Rate hikes, if energy-driven inflation surges, are back on the table.
There’s also a twist that OPEC never anticipated. Over the weekend, OPEC+ agreed on a production increase larger than expected. In a normal market, that would push prices down. But right now, that potential supply boost is an “entirely moot point,” according to RBC energy analyst Helima Croft, because there’s no sea passage to get the oil to market. The lion’s share of those additional barrels would be stranded assets in an extended war scenario.
A Brief Flicker Of Hope, Then Back To Reality
Brent crude briefly dipped below $90 on Monday afternoon after Trump told CBS News that the military operation was “very complete” and tracking ahead of schedule, adding that Iran had effectively lost its navy, communications and air force. US equities also rebounded briefly, with the S&P 500 and Nasdaq both rising more than 1% before earlier losses resumed.
The market’s relief was short-lived. Iran named hardline Ayatollah Mojtaba Khamenei to succeed his late father as Supreme Leader on Monday, a signal of defiance from Iran’s leadership amid heavy US and Israeli bombardment, and a sign that the regime is not signaling capitulation. A new, more hardline Supreme Leader at this particular moment is not the detail markets were hoping for.
The gap between Trump’s confidence and the market’s skepticism is essentially the story of this conflict so far. The administration insists it will be over quickly. Analysts keep pointing to the drones, the closed strait, the shuttered refineries, and the absence of any credible diplomatic track, and saying: not so fast.
What Happens Next
The variables that matter from here are straightforward: Does the Strait of Hormuz remain effectively closed? Does Iran escalate attacks on Saudi, Kuwaiti, or UAE energy infrastructure? Does the US manage to restore any credible shipping insurance and naval escort program that actually moves tankers? And how long can Iraq and Kuwait keep oilfields shut in before the infrastructure damage becomes hard to reverse?
Rystad Energy’s Amir Zaman warned that even after a conflict ends, returning production to normal levels could take days, weeks, or months, depending on how long fields have been shut in and what damage has been done to infrastructure. There’s no switch to flip back on. The supply disruption doesn’t end the day a ceasefire is announced.
Oil at $100 is already the story. The question is whether the market has actually priced the full scenario of a conflict that runs weeks longer, and whether $150 oil is what it takes to finally get all parties to a table. For consumers filling up this week, that’s cold comfort. For the global economy, it’s a risk that is no longer theoretical.
For more on energy market developments, follow our Markets coverage at BusinessTech.News. For live data on crude oil prices, see the US Energy Information Administration’s weekly petroleum report.
