Iran War Shuts Hormuz, Oil Prices Surge Above $100, Threatening Global Economy
Takeaway
The 40% surge in Brent crude highlights the vulnerability of global supply chains to geopolitical shocks. Energy traders should closely monitor statements from OPEC+ regarding alternative supply options and assess the feasibility of alternative routes to bypass the Strait of Hormuz. Companies with significant exposure to Asian markets, particularly China and India, face the greatest risk from sustained disruptions.
The ongoing war between the U.S., Israel, and Iran, which began on February 28, 2026, has triggered a major disruption in global energy markets, with Brent crude oil prices surging above $100 per barrel on March 9. Iran's response to attacks on its political leadership, nuclear facilities, and infrastructure included threatening to shut down the Strait of Hormuz, a chokepoint through which approximately 20 million barrels of oil and 112 billion cubic meters of LNG, equivalent to 20% of global LNG trade, transit daily. Maritime traffic in the Strait of Hormuz has already fallen by 95%.
The closure of the Strait of Hormuz, effectively in place since early March 2026, is having a far-reaching impact, reminiscent of the 1970s oil shocks and the 2022 Ukraine war. The International Energy Agency (IEA) has launched the largest emergency reserve release in its history, with all 32 member countries agreeing on March 11 to release 400 million barrels of oil into the global market. This volume is intended to serve as a “time bridge” to prevent a complete collapse of the global energy supply chain. Russia's Foreign Ministry has called for an end to the U.S. and Israeli aggression against Iran to restore stability in the Strait of Hormuz.
The Strait of Hormuz, at its narrowest point, is only 21 nautical miles (39 km) wide and consists of 2-mile-wide navigable channels. In 2025, nearly 15 million barrels per day of crude oil, nearly 34% of global crude oil trade, passed through the Strait, with most exports destined for Asia. China and India alone received 44% of these exports. The disruption is also affecting LNG exports from Qatar and the UAE, which together represent almost 20% of global LNG exports.
The rise in oil prices is expected to increase inflation, potentially limiting central banks' ability to lower interest rates. JPMorgan economists estimate that U.S. inflation could rise from 2.4% in January to 3% or higher in the coming months, with U.S. oil prices increasing by roughly 42% from prewar levels, reaching approximately $95 a barrel. Morocco, heavily reliant on energy imports, faces the threat of high inflation. However, Algeria stands to benefit most from the Iran war among energy-exporting countries, even though its ability to increase production is limited.
Analysts are closely monitoring negotiations between the U.S. and Iran, with President Trump claiming "very good and productive" talks. However, Iran has denied any contact with the U.S.. The White House is considering options for de-escalation, with advisor David Sacks suggesting the U.S. should "declare victory and withdraw" from the conflict. The key risk remains the duration of the conflict and its impact on sustained higher oil prices, which could broaden into other costs and raise the odds of higher rates for longer.