Oil prices have climbed above $100/bbl for the first time since 2022 as the escalating US-Iran war threatens critical energy flows through the Middle East.
Hopes for a near-term de-escalation faded on Friday after US President Trump stated that only an unconditional surrender would be acceptable, heightening concerns that the conflict could become prolonged. Tensions intensified further on Monday, Mar. 9, when Iran launched new attacks on Israel and several Gulf states just hours after declaring Mojtaba Khamenei as the country’s new supreme leader.
Analysts warn that a sustained disruption of shipments through the Strait of Hormuz could trigger a severe tightening of global crude supplies and send prices significantly higher.
Vikas Dwivedi, global energy strategist at Macquarie Group, said the market could move rapidly into a supply-shock environment if hostilities continue without a diplomatic resolution.
“In our analysis, a few weeks of Hormuz closure will create a domino effect of events that could push crude to $150/bbl or higher,” Dwivedi said in a market note.
Dwivedi added that without a ceasefire or negotiated agreement, the global oil market could begin to “break in days rather than weeks or months,” as supply disruptions cascade through the region’s production and export systems.
Although the Strait of Hormuz has effectively become inaccessible for many tankers due to escalating security risks, Middle East loadings have so far remained relatively resilient. However, reports of production shut-ins have begun to emerge across parts of the region, including Iraq, Kuwait, and Qatar (LNG).
If the disruption persists, broader waves of production curtailments could unfold over the coming week. Macquarie analysts believe the final cuts would occur in Saudi Arabia roughly 20 days from now.
Shipping risks, oil and beyond
Security risks around the Strait of Hormuz remain a major constraint on shipping. Even with elevated insurance premiums and strong commercial incentives to continue shipments, many tanker operators view the risks of transit as too high.
Naval escorts could theoretically allow vessels to pass through the strait, but such operations are logistically challenging and depend heavily on available military resources. Recent experience with escort operations in the Red Sea illustrates the difficulty of maintaining secure shipping lanes during active regional conflict.
“Logistically, with a large number of vessels trapped in the Arab Gulf, reopening the straits would cause a surge of oil on the water followed by a drought as loading facility restarts, creating market oscillations lasting months,” Dwivedi said.
Beyond oil and natural gas, the disruption also threatens global trade flows for other commodities moving through the region, including container cargo, urea, and sulphur, raising the risk of broader supply-chain interruptions, according to Macquarie.
Refining markets
The market has already begun to reflect tightening conditions. Product refining margins have surged to record levels this week, signaling growing concern about fuel supply availability.
Asia—the largest destination for Middle Eastern crude—is emerging as one of the regions most immediately exposed to the escalating Iran crisis, said Tamas Vargas, oil analyst at PVM.
According to Energy Intelligence (EI), China, India, Japan, and South Korea collectively import about 14 million b/d of crude from the Middle East, the vast majority of which normally transits the Strait of Hormuz.
With shipments now disrupted, regional refiners are beginning to face severe feedstock shortages. EI estimates that refinery throughput across Asia could be cut by as much as 30% of nameplate capacity if supply constraints persist, forcing operators to consider significant run reductions.
“It is no surprise, then, that China has already suspended diesel and gasoline exports. Platts reported a Dubai cash premium of nearly $20/bbl on Thursday, and it is still rising. Competition for available barrels is intensifying. Two Reliance cargoes carrying diesel and jet fuel abruptly changed course and are now headed to Asia rather than Europe,” Vargas said.
