The ongoing conflict between Iran, the U.S., and Israel has triggered the largest supply disruption in the history of the global oil market, according to the International Energy Agency (IEA) [3][9]. Iranian attacks on oil tankers in Iraqi waters and the Persian Gulf, including three more vessels struck overnight, have effectively halted shipping traffic through the Strait of Hormuz, a critical passage for roughly 20% of global oil and gas supply [3][4][7][8][9]. Iran's new Supreme Leader, Mojtaba Khamenei, has called for the continued closure of the strait as a 'tool to pressure the enemy,' warning that oil prices could reach $200 per barrel [4][7]. Iranian military officials echoed this sentiment, stating, 'Get ready for oil to be $200 a barrel, because the oil price depends on regional security, which you have destabilised' [7].
Brent crude prices have surged, with reports of prices rising more than 7% on Thursday and touching $100 per barrel, while U.S. crude rose above $95 [2][3][9]. Since the start of the war, U.S. crude prices have increased by more than 40%, and retail gas prices have risen nearly 70 cents to $3.59 per gallon [3]. Technical analysts cite resistance levels at $90, $95, $100, $150, and $200 per barrel, with volatility expected to remain high [2][4]. Prediction markets assign only modest odds to a ceasefire by April 2026 (30-40%), and even a benign scenario is expected to reset oil prices to $70-75 per barrel, above previous forecasts of $65 [1]. A prolonged conflict could push prices north of $150, with significant implications for inflation and GDP in Europe and the UK—a 10% rise in oil prices lowers EU/UK GDP by 0.1–0.2% and lifts inflation by 0.3–0.4% over 12 months [1].
The closure of the Strait of Hormuz has prompted Saudi Arabia and the UAE to increase utilization of alternative pipelines—the East-West pipeline (7 million barrels/day) and ADCOP (1.5–1.8 million barrels/day)—to partially offset the nearly 20 million barrels/day typically transiting Hormuz [8]. However, risks of infrastructure damage and attacks remain, limiting total capacity [8]. The U.S. and 32 other countries agreed to release 400 million barrels of oil from stockpiles, including 172 million barrels from the U.S. Strategic Petroleum Reserve, but this historic release has failed to calm the market [3][9]. The U.S. Navy is not yet ready to escort tankers through Hormuz, with plans to possibly begin by the end of the month [9].
The conflict has also spurred a boom in European defense stocks, with Leonardo and Rheinmetall reporting record-high order backlogs and ambitious growth targets. Leonardo shares rose up to 9% after unveiling plans to double profits by 2030, while Rheinmetall expects sales growth of 40–45% in 2026 [5]. Barclays upgraded Leonardo to Overweight, citing the U.S.-Iran conflict as a driver for short-term sector growth [5].
Despite the turmoil, gold prices have remained largely unmoved, trading between $5,050 and $5,200 per troy ounce, with spot gold last seen at $5,175 [6]. Analysts attribute this to a stronger dollar, higher Treasury yields, and panic selling, though banks remain bullish with J.P. Morgan and Deutsche Bank forecasting year-end targets of $6,300 and $6,000 per ounce, respectively [6].
The disruption of Hormuz is also impacting global food prices, as the strait is a key transit point for fertilizers. Analysts warn of higher farming costs, reduced crop yields, and more expensive food, with Gulf countries and Sub-Saharan Africa particularly vulnerable to shortages and price spikes [10].
CONCLUSION
The Iran conflict has caused an unprecedented disruption in global oil supply, sending prices sharply higher and triggering volatility across energy and equity markets. The closure of the Strait of Hormuz, combined with ongoing attacks and limited alternative routes, has raised the risk of prolonged inflation and economic shocks. While emergency oil releases and increased pipeline utilization offer partial relief, market sentiment remains negative and uncertainty persists regarding the duration and impact of the crisis.