Oil surges toward $100 as Iran war threatens Strait of Hormuz and global energy supply

2026-03-01 - 15:17

AI-generated image Global oil prices surged on Sunday (March 1) after US and Israeli strikes on Iran triggered a new war in the Middle East, raising fears that the critical Strait of Hormuz could be shut down and disrupt more than 20 percent of the world’s oil supply. Brent crude jumped 10 percent to about 80 dollars a barrel in over the counter trading on March 1, 2026. Analysts warned that prices could quickly climb towards 100 dollars a barrel if the conflict continues or if shipping through the Strait of Hormuz is blocked. The attacks on Iran were followed by swift retaliation from Tehran, targeting assets linked to the United States and Israel across several Middle Eastern countries, including Israel, Qatar, the United Arab Emirates, Kuwait, Bahrain, Jordan, Saudi Arabia, Iraq and Oman. Strait of Hormuz The Strait of Hormuz lies between Oman and the United Arab Emirates on one side and Iran on the other. It connects the Gulf with the Gulf of Oman and the Arabian Sea. At its narrowest point, it is just 33 kilometres wide, with shipping lanes only about 3 kilometres wide in each direction, making it highly vulnerable during military tensions. According to the US Energy Information Administration, about 20 million barrels of oil passed through the strait each day in 2024, representing around 500 billion dollars in annual global energy trade. Roughly 30 percent of the world’s seaborne crude oil moves through this route. Nearly 20 percent of global jet fuel and about 16 percent of gasoline and naphtha shipments also transit the strait. In addition, about one fifth of global liquefied natural gas shipments pass through the corridor, with Qatar accounting for most of those volumes. Eighty four percent of crude oil and condensate shipments moving through the strait last year went to Asian markets. China, India, Japan and South Korea together accounted for 69 percent of the total crude flows. Their industries, transport systems and power generation depend heavily on steady Gulf energy supplies. Shipping Disruptions and Security Threats An official from the European Union told Reuters that vessels crossing the strait have received very high frequency transmissions from Iran’s Islamic Revolutionary Guard Corps stating that no ship is allowed to pass. However, Iran has not officially declared a closure. Even so, most tanker owners, oil majors and trading houses have suspended crude oil, fuel and LNG shipments via the strait after Tehran warned ships against moving through the waterway. Shipping data shows at least 150 tankers, including crude oil and LNG vessels, have dropped anchor in open Gulf waters beyond the Strait of Hormuz. The vessels are clustered near the coasts of major oil producers such as Iraq and Saudi Arabia, as well as LNG giant Qatar. The United Kingdom Maritime Trade Operations reported significant military activity in the area and an incident two nautical miles north of Oman’s Kumzar. On Sunday, an oil tanker was struck off the coast of Oman, signalling a serious escalation and a shift from military targets to energy assets. Energy analyst Muyu Xu of Kpler said vessel traffic through the strait has sharply declined since the war began, while the number of ships idling on either side has surged due to security concerns. Oil Could Hit 100 Dollars Energy experts say the key factor for prices is whether the Strait of Hormuz is closed. Ajay Parmar, director of energy and refining at ICIS, said prices are likely to open much closer to 100 dollars a barrel and could exceed that level if the outage continues. Analysts at RBC and Barclays also warned that oil could climb above 100 dollars. Rystad Energy estimates that even if Saudi Arabia’s East West pipeline and the Abu Dhabi pipeline are used to divert some exports, a full closure of the strait could still remove between 8 million and 10 million barrels per day of crude supply from global markets. Rystad expects prices to rise by about 20 dollars to around 92 dollars a barrel when full trading resumes. Meanwhile, the OPEC+ group agreed on Sunday to raise output by 206,000 barrels per day from April. However, this increase represents less than 0.2 percent of global demand and is unlikely to offset major disruptions. Impact on Global Economy Experts warn that a prolonged surge in oil prices would have serious consequences for the global economy. Ali Vaez of the International Crisis Group said closing the Strait of Hormuz would disrupt roughly a fifth of globally traded oil overnight, causing prices to jump sharply on fear alone. He warned that the shock would spread beyond energy markets, tightening financial conditions, fuelling inflation and pushing fragile economies closer to recession within weeks. Hamad Hussain of Capital Economics said that if crude prices rise to 100 dollars per barrel and stay there, it could add between 0.6 and 0.7 percent to global inflation. Natural gas prices would also increase. This could slow interest rate cuts by major central banks, especially in emerging markets that are more sensitive to commodity price swings. Asian governments and refiners have already begun reviewing oil stockpiles and alternative shipping routes as uncertainty grows. With tensions rising and energy infrastructure now under threat, markets are bracing for continued volatility. Any further escalation around the Strait of Hormuz could deepen the crisis and send shockwaves through oil, gas and global financial markets.