Oil spikes as widening Iran crisis disrupts flows through Strait of Hormuz

Published Mon, Mar 2, 2026 · 08:00 AM

OIL surged by the most in four years, as the US-Israeli war against Iran plunged the global crude market into turmoil, with the effective closure of the Strait of Hormuz.

Brent rallied as much as 13 per cent to above US$82 a barrel – the highest level since January 2025 – while West Texas Intermediate was near US$72. Tanker traffic through the strait – the chokepoint off Iran’s coast that handles a fifth of the world’s oil and large volumes of gas – has largely halted, with a self-imposed pause in place by shipowners and traders as the conflict spreads.

While Iranian authorities said on Sunday (Mar 1) that the key waterway remained open, they also said they had attacked three oil tankers. US President Donald Trump, meanwhile, said US forces destroyed and sank nine Iranian naval ships, and that combat operations would continue until all objectives were completed.

In reaction to the widening conflict, Organization of the Petroleum Exporting Countries and its allies (Opec+) agreed at a pre-arranged weekend meeting to increase supply quotas next month by 206,000 barrels a day. The group, which includes Iran, as well as Saudi Arabia and Russia, had been expected to resume modest hikes before the outbreak of hostilities on Saturday.

The conflict marks a dangerous new phase for the global oil market. The US and Israel fired missiles at targets across Iran on Saturday, while urging local people to overthrow the Islamic regime. Tehran responded with a wave of strikes against Israel, as well as US bases and other targets in states including Saudi Arabia, Qatar, the United Arab Emirates, Kuwait and Bahrain. Iran’s Supreme Leader, Ayatollah Ali Khamenei, was killed.

“We see Brent oil trading in the US$80-to-US$90-a-barrel range in our base case over at least the coming week,” Citigroup analysts, including Max Layton, said in a note before the start of trading on Monday.

“Our baseline view is that the Iranian leadership changes, or that the regime changes sufficiently as to stop the war within one-to-two weeks, or the US decides to de-escalate, having seen a change in leadership and a setback to Iran’s missiles and nuclear programme over the same time frame,” they added.

Crude has powered higher this year, posting back-to-back monthly rises, on sustained geopolitical tensions and a series of localised supply snarls. The gains have come despite expectations that the global oil market faced a hefty surplus, following supply increases by Opec+, as well as nations outside the group.

The jump in energy costs – if sustained – risks boosting inflationary pressures around the world. That stands to complicate the task facing central bankers, including the US Federal Reserve, as they seek to manage the pace of price gains, while also supporting growth and employment.

Iran pumps about 3.3 million barrels a day, or 3 per cent of global output, but the nation wields greater influence over energy supplies given its strategic location alongside the strait. Oil from the Persian Gulf must pass through the waterway to get to major markets such as China, India and Japan.

Tanker traffic “appears significantly disrupted as many shippers, oil producers, and insurers have shifted to a cautious wait-and-see mode”, Goldman Sachs analysts, including Daan Struyven, said. “To our knowledge, there is no confirmed damage to oil production or to oil-export infrastructure.”

Ahead of the war with Iran, President Trump had adopted an increasingly aggressive foreign policy. In late January, US forces swooped into Venezuela and seized former President Nicolás Maduro, with the administration then asserting control over the nation’s oil industry. BLOOMBERG