Oil markets are coming to terms with one of the most serious Mideast supply disruptions on record: the closure of the Strait of Hormuz. High volatility, not a sustained dramatic spike, has marked oil’s initial response to the disruption of a waterway responsible for 20% of the world’s oil flows, as traders struggle to assess the potential depth and duration of the latest Mideast Gulf war. Expectations for a swift resolution remain the prevailing sentiment for now. But some of that optimism seems rooted more in a generally held belief that such a momentous disruption will not be allowed to continue, rather than clear indications that an endgame is in hand. Any loss in confidence would portend that oil prices may yet have significant room to run. Benchmark Brent crude oil prices have climbed over 18% since US-Israeli strikes on Iran on Feb. 28 kickstarted the region’s latest hostilities, closing at $85.41 per barrel as Energy Intelligence went to press. The increase exceeds the roughly 14% spikes seen in the wake of Iran’s 2019 attack on Saudi Arabia’s 7 million barrel per day Abqaiq oil processing facilities and the first week of trade following Russia’s late-February invasion of Ukraine in 2022. Notably, rising Russia-Ukraine tensions had already caused oil prices to jump around $10 heading into Russia’s invasion, and prices spiked for a second week following the incursion; in all, Brent rose over 40% to a peak above $125/bbl. Currently, Brent is up a similar 40% from the end of 2025, with geopolitical risks led by US-Iran tensions headlining the increase. The 1973-74 Arab oil embargo, which saw the market lose about 7% of supplies, saw prices quadruple in three months to the inflation-adjusted equivalent of around $79/bbl. Roughly 17.5 million b/d of oil (crude, LPG, products) were traversing the Strait of Hormuz before the war broke out, according to shipping analytics firm Kpler.
