SINGAPORE/NEW YORK: Oil prices skyrocketed more than 8% on Monday after Iran shut the Strait of Hormuz and attacked vessels following US-Israeli strikes that killed top Iranian leadership [citation:1][citation:3][citation:5]. Brent crude surged past $79 per barrel, while West Texas Intermediate topped $72 — the highest levels since January and June 2025 respectively [citation:3][citation:5].
The dramatic price spike follows the most serious escalation in the Middle East in decades. On February 28, US and Israeli forces launched extensive strikes across Iran, reportedly killing Supreme Leader Ayatollah Ali Khamenei and several senior officials [citation:5][citation:7]. Iran retaliated with missile barrages against Israel and US installations in Bahrain, Kuwait, Qatar and UAE, and crucially — announced the closure of the Strait of Hormuz on the night of Feb 28 [citation:2][citation:5].
- 15 million barrels/day — about 20% of global oil supply transits here [citation:1][citation:3]
- Also 20% of global LNG — mainly from Qatar, UAE, Oman [citation:3][citation:9]
- Countries affected: Saudi, Iraq, Kuwait, UAE, Qatar, Iran — all exports blocked [citation:2]
- Status: Iranian Revolutionary Guard banned transit; multiple tankers attacked [citation:2][citation:5]
- Shipping halt: Over 200 vessels anchored outside, insurers withdraw cover [citation:3][citation:5]
Attacks on vessels halt all traffic
The UK Maritime Trade Operations reported at least four incidents of vessels coming under attack from "unknown projectiles" since March 1 around Hormuz [citation:3]. An Omani tanker, Skylight, and the UAE's Abu Al Bukhoosh offshore platform were struck [citation:3]. One seafarer was killed and three tankers damaged in Gulf waters [citation:5]. Iran's Mehr news agency said an unauthorized oil tanker attempting to transit was hit and is "sinking" [citation:2].
Major oil companies and traders immediately ordered all vessels to avoid the strait, and several European nations banned their flagged ships from entering [citation:2]. The de facto closure means roughly 15 million barrels of daily crude exports from Saudi Arabia, Iraq, UAE, Kuwait, and Qatar are stuck [citation:2][citation:3].
OPEC+ reacts: output hike but 'limited relief'
Eight OPEC+ members — Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, Oman — agreed Sunday to increase production by 206,000 barrels per day in April, more than analysts expected [citation:1][citation:3][citation:7]. However, analysts at Rystad Energy, Citi and Wood Mackenzie say the move offers little immediate help because the blocked exports cannot reach markets [citation:1][citation:3][citation:9].
"If flows through the Gulf are constrained, additional production provides limited relief. Access to export routes is far more important than headline output targets." — Jorge León, Rystad Energy [citation:1].
Market reaction: 'risk premium' explodes
Brent futures jumped as much as 13% to $82.37 — highest since January 2025 — before settling near $79.80 [citation:3][citation:5]. WTI spiked over 12% to $75.33 intraday [citation:5]. Gasoline futures surged 9% in the US [citation:5].
Asian stock markets tumbled: Japan's Nikkei fell 2.7%, Hong Kong Hang Seng dropped 2.08%, and Taiwan Taiex lost 0.67% [citation:8]. Indian markets are bracing for a selloff when they open, with concerns over inflation and import bill [citation:9].
'$100 oil possible' if closure persists
Consultancy Wood Mackenzie warned that oil could exceed $100 per barrel if tanker traffic is not swiftly restored [citation:9]. Citi analysts expect Brent to trade in a $80–90 range over the coming week, but a prolonged conflict could push prices to $120 [citation:3][citation:5].
"In the current scenario, oil prices above $100 are possible if transit flows are not re-established quickly," said Alan Gelder of Wood Mackenzie, drawing parallels to the 1970s oil embargo and the initial Russia-Ukraine shock [citation:9].
Global supply chain & inflation fears
The closure threatens not only crude but also LNG supplies — Qatar alone accounts for ~20% of global LNG trade [citation:9]. European gas prices are expected to spike, with storage already below seasonal norms [citation:9].
India imports 88% of its crude, making it highly vulnerable. Any sustained rise will widen the current account deficit and fuel retail inflation [citation:9]. US gasoline prices could break above $3/gallon, a political risk for the Trump administration ahead of midterms [citation:5].
Price snapshot (vs Friday close)
| Benchmark | Current price | Change ($) | Change (%) |
|---|---|---|---|
| Brent crude | $79.86 | +$6.99 | +9.6% |
| WTI crude | $72.90 | +$5.90 | +8.8% |
| OPEC basket | $78.40 (est) | +$6.50 | +9.0% |
| US gasoline futures | $2.408/gal | +$0.123 | +5.4% |
India under pressure
Indian refiners are scrambling to secure alternative supplies, but options are limited. "We are exploring alternative shipping routes and have activated government-to-government channels," an oil ministry official said [citation:5][citation:9]. Strategic petroleum reserves (SPR) could be tapped if disruptions continue, but SPR covers only about 9 days of import requirement.
Asian currencies weakened on risk aversion. The offshore rupee fell to 87.32, while Brent's surge threatens to push India's trade deficit above $200 billion in FY26 if sustained. Analysts expect diesel and petrol prices to rise by ₹4-6 per litre in coming weeks if crude stays above $75 [citation:9].
What happens next?
All eyes are on whether diplomatic efforts can reopen the Strait. The US Fifth Fleet, based in Bahrain, has warned it may intervene to secure passage, but that risks direct confrontation with Iranian forces. "The key question is when vessels re-establish export flows," said Wood Mackenzie. Even in an optimistic scenario, export flows could take weeks to resume [citation:9].
Insurance costs for any ship approaching the Gulf have skyrocketed, and many charterers have declared force majeure. For now, the global oil market is experiencing its biggest supply shock since the 1970s, and prices are poised to remain volatile [citation:3][citation:9].
Key takeaways for investors & economy
- Oil at 4-month high: Brent $79.86 (+9.5%), WTI $72.90 (+8.8%) as Hormuz closure halts 20% of global supply [citation:1][citation:3].
- Supply shock: 15 million bpd effectively blocked; tanker traffic suspended indefinitely [citation:2][citation:5].
- OPEC+ output hike (206k bpd) insufficient because barrels can't exit the Gulf [citation:3][citation:7].
- $100+ oil possible if closure lasts weeks — Wood Mackenzie, Citi [citation:9].
- Inflation risks: US gasoline above $3/gal, India petrol/diesel up ₹4-6/litre if sustained [citation:5][citation:9].
- Asian markets slide: Nikkei -2.7%, Hang Seng -2.08%; Indian markets brace for selloff [citation:8].
Disclaimer: The analysis and views are for information only. Please consult your advisor before taking investment decisions.