Oil prices have experienced significant volatility and sharp increases following the outbreak of war between the U.S.-Israel coalition and Iran, with Brent crude surging more than 55% since the conflict began on February 28, 2026, reaching nearly $120 a barrel at its peak [2]. The initial strikes killed several key Iranian officials, including Ayatollah Ali Khamenei, Iran's longtime supreme leader, and led to retaliatory attacks by Iran on Gulf infrastructure, severely disrupting energy exports and closing navigation in the Gulf [2]. March saw one of the largest monthly oil price jumps on record, with Brent gaining 51% as Gulf output fell and exports stalled [2].
The market has oscillated between panic and relief, with major price swings driven by headlines about the war. Notably, Brent crude experienced its biggest daily gain since the Russia-Ukraine war and its largest daily drop in decades during this period [2]. Key escalations included Iran's oil facilities being hit, the appointment of Mojtaba Khamenei as the new Supreme Leader, and retaliatory strikes on major energy infrastructure such as Iran's South Pars gas field and Qatar's Ras Laffan facility [2]. These events further tightened supply and heightened market uncertainty.
ING analysts Warren Patterson and Ewa Manthey argue that the market is currently underpricing the risks and duration of ongoing supply disruptions, as well as the restocking needs that will follow [1]. They note that while energy markets initially surged after Iran reversed its opening of the Strait of Hormuz, optimism over potential progress in US-Iran peace talks has kept prices from reflecting the full extent of supply risks [1]. Negotiations between the US and Iran are set to resume in Pakistan, with US Vice President JD Vance and an Iranian delegation expected to attend, although the ceasefire is set to end on Wednesday and President Trump has indicated he is unlikely to extend it [1]. ING suggests that a lack of progress in talks could push oil and gas prices even higher [1].
Both sources highlight that the longer supply disruptions persist, the tighter the oil market becomes, and that energy flows and upstream production will take time to recover even after hostilities end [1][2]. ING concludes that the market's price floor for oil is likely to remain considerably higher for the rest of the year compared to pre-war levels, given the fragility of any potential US-Iran agreement and the ongoing risks to supply [1].
CONCLUSION
The Iran war has triggered a historic surge in oil prices, with Brent crude rising over 55% amid severe supply disruptions through the Strait of Hormuz. While markets are hopeful for progress in US-Iran peace talks, analysts warn that risks remain underpriced and that oil prices are likely to stay elevated for the foreseeable future. The market impact is high, and volatility is expected to persist as negotiations continue and supply challenges remain unresolved.