Oil markets are reacting exactly as many feared. With Iran escalating attacks and threatening to close the Strait of Hormuz, global energy prices have jumped sharply, and the shock is already reaching consumers.
Brent crude surged 9 percent to above $85 a barrel, its highest level since July 2024. U.S. West Texas Intermediate crude rose more than 7 percent, climbing to around $76 to $77 a barrel. European natural gas prices spiked as much as 45 percent. U.S. gasoline prices climbed about 11 cents a gallon to $3.11.
This marks the third straight session of rising oil prices as the U.S. and Israeli air campaign against Iran widens and Iran retaliates.
Why Oil Is Spiking
The surge is tied directly to mounting threats around the Strait of Hormuz, the narrow waterway that carries roughly a fifth of the world’s oil and liquefied natural gas. Approximately 20 to 21 million barrels of crude oil move through the strait every day.
Iran and Oman control the passage. Iranian media reported that a senior Revolutionary Guards official declared the strait closed and warned that Iran would fire on any ship attempting to pass.
Even without a formal closure, the damage has already begun. Tankers and container ships are avoiding the waterway after insurers canceled coverage. War risk premiums have surged, and some underwriters have withdrawn entirely. More than 200 vessels have dropped anchor rather than risk transit.
As maritime security leader Jakob Larsen put it, “Ships in the Persian Gulf are under threat from Iranian attacks,” adding that vessels are “trying to depart from the Persian Gulf to get away from the threat.”
When tankers cannot get insurance, they do not sail. That reality alone can restrict supply.
Direct Attacks and Escalation
The current crisis is not theoretical. Multiple ships have been struck in recent days.
The tanker Skylight was hit near Oman’s Musandam Peninsula, injuring crew members. The crude tanker MKD Vyom suffered an explosion and fire that killed a crew member. The product tanker Hercules Star was struck near the United Arab Emirates. Other vessels reported explosions and fires near Sharjah, Muscat, and Mina Saqr.
Beyond physical attacks, electronic warfare has disrupted GPS systems affecting more than 1,000 ships. Some vessels appeared to be located on land or moving erratically due to spoofed signals.
Meanwhile, Iran has expanded retaliation beyond shipping. Strikes have targeted energy infrastructure in Gulf countries. Qatar suspended liquefied natural gas production after military attacks on two of its sites. Saudi Arabia intercepted drones targeting an oil refinery. Israel shut some gas fields. Iraqi Kurdistan output has virtually ceased. Saudi Arabia closed its largest refinery.
ING analysts warned, “While there are concerns about oil flows through the Strait of Hormuz, a greater risk to the market would be Iran targeting additional energy infrastructure in the region. This could lead to more prolonged outages.”
Who Gets Hit Hardest
Asia faces the most immediate risk. About 84 percent of shipments through the Strait of Hormuz go to countries such as China, India, Japan, and South Korea. Much of the liquefied natural gas that transits the strait also heads to Asia.
Europe is also vulnerable because gas reserves are low. Natasha Fielding of Argus Media warned, “There is no telling how much further European gas and global L.N.G prices might soar if there is no rapid resolution to the Iran conflict.”
Al Salazar of Enverus Intelligence Research cautioned that “a prolonged disruption to the Strait of Hormuz would represent a significant macroeconomic shock and rapidly tighten energy balances, while raising the risk of recession.”
Consumers everywhere would feel it. Higher oil prices ripple into food, shipping, airfare, heating, and electricity. Alex Jacquez of Groundwork Collaborative warned that households could face higher costs in “nearly every sector of the economy.”
How High Could Prices Go
Some analysts expect Brent to reach or exceed $100 a barrel if the conflict continues. Bernstein raised its 2026 Brent forecast to $80 but said prices could reach $120 to $150 in an extreme prolonged conflict.
Morgan Stanley analysts noted that gas demand is “fairly inelastic compared to oil and liquids fuels, so any loss of supply can have big impacts on price.”
Even limited disruption can send prices sharply higher because markets fear not only a total shutdown but reduced fleet productivity. Slower voyages, rerouting around the Cape of Good Hope, and canceled departures tighten supply even without a formal blockade.
President Trump has said the military campaign could last up to five weeks or more, increasing the risk that elevated prices persist.
Rubio Says the U.S. Will Act
Secretary of State Marco Rubio acknowledged that rising energy costs were expected.
“We knew that going in would be a factor, and so we have a program in place that will begin to be implemented by [Energy] Secretary [Chris] Wright, [Treasury] Secretary [Scott] Bessent,” Rubio said.
He added, “Starting tomorrow, you will see us rolling out those phases to try to mitigate against that.”
Rubio emphasized the stakes, warning, “This terroristic regime led by radical clerics has the ability, potentially to shut off 20 percent of global energy. That’s the kind of leverage they have because of their navy.”
He made clear the U.S. would not tolerate that leverage. “We’re going to destroy their navy, but there is a plan in place,” Rubio said.
The United States has reinforced naval forces in the region and coalition navies are escorting commercial shipping while preparing for mine clearing and protection operations.
What Happens Next
For now, the strait is not formally closed. But ships have been damaged, insurers have retreated, traffic has thinned dramatically, and electronic interference continues.
Markets are pricing in risk, not certainty. If Iran continues targeting vessels or infrastructure, prices could climb further. If naval escorts stabilize shipping lanes and insurance markets return, some pressure may ease.
However, as long as tankers face missile threats, drone attacks, and canceled insurance coverage, disruption is likely to continue. Even if ships want to pass, they may not be able to do so safely or affordably.
In a world where one narrow waterway carries roughly one fifth of global oil, instability in the Strait of Hormuz was always going to move markets. The surge to $85 a barrel may only be the beginning if the conflict widens or drags on.
FAM Editor: Look for countries to start offering sovereign sponsored insurance.
