Global oil markets experienced sharp volatility this week as the ongoing war involving Iran continues to disrupt shipping through the Strait of Hormuz, a critical passageway for the world’s energy supply. Oil prices briefly surged above $100 per barrel Sunday night for the first time since Russia’s 2022 invasion of Ukraine. U.S. crude oil, known as West Texas Intermediate (WTI), spiked as high as $119.48 before settling Monday at $94.77 per barrel. The global benchmark Brent crude climbed to $119.50 before closing at $98.96 per barrel. Prices later pulled back in extended trading Monday afternoon, with U.S. crude falling to about $85 per barrel and Brent dropping to roughly $88 per barrel.
The dramatic swings come as fighting in the region enters its 11th day, creating major disruptions to maritime traffic through the Strait of Hormuz. Roughly 20 percent of the world’s oil supply normally passes through the narrow waterway between Iran and Oman, making it one of the most important chokepoints in the global energy market. According to analysts at Rapidan Energy, the situation represents the largest oil supply disruption in history.
With the security situation deteriorating, many commercial vessels have stopped traveling through the strait due to fears of potential Iranian attacks. Only a small number of ships are currently moving through the waterway. Iranian officials have warned that tanker traffic must proceed with caution as tensions continue to escalate. The disruption has forced several Middle Eastern oil producers to reduce output. Kuwait announced precautionary cuts to both production and refinery operations due to threats against shipping routes.
Production in Iraq has also been severely impacted. Output from the country’s three main southern oilfields has reportedly fallen about 70 percent, dropping to approximately 1.3 million barrels per day from roughly 4.3 million barrels before the conflict. The United Arab Emirates has also begun adjusting offshore production levels, citing storage limitations as crude supplies build up with fewer tankers willing to transport oil through the strait.
Meanwhile, gasoline prices in the United States have already begun climbing. The national average rose 16 percent over the past week, reaching about $3.48 per gallon. President Donald Trump addressed the situation Monday evening while speaking to House Republicans in Miami, describing the conflict as a short-term operation that he expects to conclude soon. He said Iranian missile launches have decreased by about 90 percent and drone activity has dropped by roughly 83 percent since the fighting began. The president also warned that further interference with global oil supplies could lead to U.S. strikes on Iranian infrastructure, including the country’s electrical grid.
Trump also indicated the United States is considering taking control of the Strait of Hormuz to ensure safe passage for ships. He told reporters that vessels are still moving through the strait but said the administration is evaluating additional steps to secure the waterway. In addition, officials are reportedly discussing the possibility of easing oil sanctions on Russia as a way to stabilize global supply and reduce price pressure.
The G7 nations are also monitoring the situation closely. Energy ministers from Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States are scheduled to hold a virtual meeting to discuss the potential release of oil from national strategic reserves if the disruption continues. Energy analysts say the length of the conflict will play a major role in determining how high prices may climb. If the current disruption lasts two months, Brent crude could exceed $110 per barrel. If it continues for four months, prices could surge as high as $135 per barrel.
For now, global markets remain on edge as shipping activity through the Strait of Hormuz remains limited and oil producers across the Middle East struggle to move crude to international markets.
