Oil Surges as Strait of Hormuz Traffic Halts; Markets Cautious
A motorboat cruises off the coast of the United Arab Emirates, on the Strait of Hormuz, with a tanker seen in the background, on February 25, 2026. Tanker traffic through the strait has come essentially to a stop after Iran declared the strait closed following attacks on Iran by the U.S. and Israel.
Global crude briefly jumped more than 9% late Monday and equity markets weakened as the conflict with Iran entered a third day and tanker traffic through the Strait of Hormuz effectively stopped. Brent crude traded in the high $70s Monday morning — well above pre‑strike levels but below worst‑case forecasts — with prices briefly topping $80 after markets reopened Sunday night.
Traders say the market has been measured so far. Rebecca Babin, an energy trader at CIBC Private Wealth, noted the lack of widespread panic. Still, analysts warn prices could exceed $100 a barrel if flows remain disrupted for an extended period or the war spreads and damages oil infrastructure. Saudi authorities reported shooting down drones aimed at a refinery, and Qatar Energy said two natural gas facilities were attacked.
Equity markets initially sold off then pared losses as investors took a wait‑and‑see stance. The Dow fell as much as 600 points intraday but finished down just over 70 points, while the S&P ended roughly flat.
Gasoline and natural gas impacts
When oil trading resumed after U.S. and Israeli strikes, prices spiked briefly before easing. Patrick de Haan of GasBuddy estimates U.S. retail gasoline could rise 10–30 cents per gallon on average in the coming days, with some stations possibly increasing by as much as 85 cents.
About 20% of global oil consumption transits the Strait of Hormuz. Since the conflict began, four vessels have been struck in Gulf waters. Concerns about vessel safety and higher insurance costs have led many tankers to avoid the strait, effectively halting much tanker traffic.
The strait is also a major chokepoint for liquefied natural gas (LNG). European natural gas prices have surged more than 20%, while U.S. spot prices have stayed within recent ranges. Recent U.S. investments in LNG terminals have made the United States the world’s largest LNG exporter; higher global prices help exporters but can raise electricity and heating costs for domestic consumers.
Why prices aren't higher — yet
Several factors have muted a larger oil shock so far. Recent supply has outpaced demand, letting countries — notably China — build sizable inventories onshore and afloat that act as a buffer against short disruptions. Traders are also factoring in the possibility of a quick resolution; past geopolitical spikes have often been short‑lived.
'We have not seen anything like this in pretty much the history of the Strait of Hormuz,' said Claudio Galimberti, chief economist at Rystad Energy, comparing the choke point to blocking an aorta. Angie Gildea, U.S. energy strategy leader at KPMG, noted there are buffers — 'strategic reserves, rerouted cargoes, elevated floating inventories' — but warned those are temporary stopgaps. The critical variable remains how long the conflict endures.
OPEC+ response and stranded barrels
Over the weekend, OPEC+ agreed to raise production by more than expected, a step that would normally ease prices. But with seaborne export routes constrained, that extra oil may be hard to move to market. Helima Croft of RBC warned much of the region’s OPEC output could become 'stranded assets' if the conflict persists; Iraq might even be forced to shut in production if it cannot export via the strait.
Iran has achieved the practical halt in shipping not through a full naval blockade but via targeted drone and rocket attacks that have been sufficient to deter shipping companies and insurers from sending tankers through the Hormuz bottleneck.
The outlook hinges on whether shipping can resume and how long the strikes and counterstrikes continue. If the disruption proves short‑lived, buffers and reroutes may limit lasting price pain; if it persists or escalates, markets could face a far steeper shock.