Global crude briefly jumped more than 9% late Monday and equity markets fell as the conflict with Iran entered its third day, after tanker traffic through the Strait of Hormuz effectively stopped.
Brent crude, the international benchmark, was trading in the high $70s Monday morning — a marked rise from levels before U.S. and Israeli strikes, but short of worst‑case forecasts. “The crude market is extremely measured,” says Rebecca Babin, an energy trader at CIBC Private Wealth. “I don’t see panic out there.”
Analysts warn prices could top $100 a barrel if oil flows remain disrupted for an extended period or if 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.
Stock markets initially sold off then pared losses as investors adopted a wait‑and‑see stance. The Dow fell as much as 600 points intraday but finished down just over 70 points; the S&P ended roughly flat.
Gasoline and natural gas impacts
Oil trading was closed over the weekend when the U.S. and Israel struck Iran; when markets reopened Sunday night, prices briefly exceeded $80 a barrel 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 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 remained within recent ranges. Recent U.S. investments in LNG terminals have made the U.S. the world’s largest LNG exporter; higher global prices benefit exporters but can raise electricity and heating costs for domestic consumers.
Why prices aren’t higher — yet
Iran has long threatened to close the Strait of Hormuz but has never before succeeded in stopping traffic so comprehensively. “We have not seen anything like this in pretty much the history of the Strait of Hormuz,” says Claudio Galimberti, chief economist at Rystad Energy, likening it to blocking an aorta.
Several factors have muted a larger oil price shock. Recent supply has outpaced demand, allowing countries — notably China — to build substantial inventories onshore and afloat, creating a buffer against short disruptions. Traders are also pricing in the possibility the conflict will be resolved quickly; past geopolitical spikes have often been short‑lived.
“There are buffers — strategic reserves, rerouted cargoes, elevated floating inventories,” Angie Gildea, U.S. energy strategy leader at KPMG, wrote to NPR, but she warned those are stopgaps. The key variable is how long the conflict endures.
OPEC+ response and stranded barrels
Over the weekend, OPEC+ agreed to raise production by more than expected — a move that would typically ease prices. But with seaborne export routes constrained, that extra oil may be difficult to move to market. Helima Croft of RBC warns 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 by a full naval blockade but through targeted drone and rocket attacks, enough to deter shipping companies and insurers from sending tankers through the Hormuz bottleneck.
(Reporting contributions from Rafael Nam and Aya Batrawy.)