The recent strikes between Iran and US/Israeli forces, followed by Iranian counterattacks on regional oil and gas infrastructure, have rattled global markets and revived concerns over energy supplies and inflation. Stock indices slid while crude and gas prices jumped after the initial exchanges.
Brent crude climbed above $80 a barrel in the first trading sessions after the attacks and continued to trend higher. Asian and European gas prices also rose sharply. Much of the market focus has centered on the Strait of Hormuz, a strategic chokepoint that handles roughly 20% of seaborne oil and substantial volumes of gas. Iran’s Islamic Revolutionary Guard Corps declared the waterway closed and warned it would target vessels attempting to transit; at the same time, reports said China was urging Iran to keep the strait open, reflecting Beijing’s dependence on the route for about half its oil imports.
The US president announced plans to insure and escort tankers and other ships through the strait, but provided few operational details. Analysts said naval escorts could help but would take time to set up and might still be vulnerable to attacks, leaving markets nervous until Iran’s strike capability is credibly reduced.
Insurance and shipping disruptions
Although the strait remains officially open, commercial tanker traffic has effectively stalled as operators suspend sailings amid safety worries and sharply higher insurance costs. Major marine insurers — including Gard, Skuld, NorthStandard, the London P&I Club and the American Club — said they would withdraw war risk cover for vessels in the Middle East Gulf effective March 5, forcing shipping firms to seek scarcer and more expensive policies. More than 150 vessels, including oil and LNG tankers, were reported anchored in and around the strait, tightening available flows and adding immediate logistical strain.
Damage to regional energy infrastructure
Iranian strikes and related attacks have hit key facilities across the Gulf. Saudi Aramco closed its largest domestic refinery after a drone strike; QatarEnergy halted LNG production at two major gas processing plants; and a drone attack at an industrial site in Fujairah, UAE, sparked fires. How much supply is lost will depend on the extent of physical damage and how long shipping routes and processing facilities remain disrupted.
Market reaction and outlook
Traders appear to be treating much of the shock as potentially short-lived: short-dated energy contracts spiked more than longer-dated ones, implying an expectation that supply will normalize. Oxford Economics’ head of energy forecasting, Bridget Payne, said global markets are reasonably well supplied and that Iran is unlikely to sustain a prolonged, severe disruption, forecasting Brent near $79 per barrel in Q2 before easing. By contrast, some analysts warn that a protracted conflict could push prices toward $100 per barrel.
The bigger immediate risk is trade disruption rather than outright lost output: spare production capacity in Saudi Arabia and the UAE can offset some Iranian shortfalls, but alternative shipping routes can only bypass roughly one-third of typical flows through the Strait of Hormuz.
Regional economic exposure
Asian economies are especially exposed because a large share of crude and LNG transits the strait en route to China, India, Japan and South Korea. In 2024 about 84% of crude oil and condensate and 83% of LNG moving through the Hormuz went to Asian markets. China purchases nearly 90% of Iran’s sanctioned oil, but Iranian crude represents only about 11% of China’s overall imports, so a sustained shipping disruption would likely hurt China more than a loss of Iranian output alone — giving Beijing a strong interest in keeping the corridor open and tempering the scope of any military escalation in support of Iran.
Europe faces exposure mainly through gas: the euro weakened as investors feared that a prolonged disruption could lift eurozone inflation and undermine a fragile recovery. Europe is a major market for Qatari LNG; if Qatari output remains offline, Asian buyers may compete for available cargoes, driving up prices and complicating efforts to refill European storage after a cold winter. European gas futures rose sharply, with one benchmark jumping about 22% to €54.29 per megawatt-hour in the immediate follow-up to the strikes.
Overall impact will hinge on how long closures and damage persist. Short interruptions would likely be managed with existing spare capacity and rerouting; extended conflict that damages infrastructure or keeps shipping suspended would tighten global oil and LNG supplies and raise prices materially.
Edited note: This piece was updated to reflect US plans to insure and escort ships through the Strait of Hormuz and recent moves in oil and gas prices.