The Escalating Middle East Conflict Pushes Oil Above $100 as Strait of Hormuz Faces Disruptions

Middle East conflict disrupts Hormuz, drives oil above $100 as attacks hit energy infrastructure and threaten global supply chains and markets

Cover Image Attribute: The file image of Phase 12 of the South Pars gas field facilities. / Source: AFP

A rapidly intensifying conflict involving Israel, the United States, and Iran has pushed global oil prices well above $100 per barrel (once again in last two weeks), with benchmark Brent crude surging to levels not seen in years as attacks target critical energy infrastructure across the Persian Gulf. The crisis, now in its third week as of mid-March 2026, has effectively halted much of the shipping through the Strait of Hormuz, a vital chokepoint carrying about 20% of the world's oil and liquefied natural gas shipments, leading to widespread production shutdowns and raising concerns about prolonged supply disruptions.
The escalation traces back to an Israeli strike on Iran's South Pars gas field, the world's largest offshore natural gas deposit shared with Qatar, which supplies a significant portion of Iran's domestic needs and exports to neighboring countries. In response, Iran launched retaliatory attacks on energy facilities in Qatar, including the Ras Laffan industrial hub, as well as sites in Saudi Arabia such as the Samref refinery on the Red Sea and facilities in the United Arab Emirates and Kuwait. These strikes damaged gas processing and export infrastructure, with QatarEnergy reporting extensive harm that could require years for full repairs and result in substantial annual revenue losses. Reports also indicated fires at refineries in Kuwait and disruptions to power generation in Iraq due to halted Iranian gas supplies.
The attacks extended to maritime traffic, with Iranian drones, missiles, and other projectiles targeting vessels in the Gulf, leading to nearly 20 confirmed incidents or suspicious events since late February. Shipping through the Strait of Hormuz has been largely suspended, with only a handful of non-Iranian vessels risking transit. The United Kingdom Maritime Trade Operations (UKMTO) in Dubai, a longstanding monitoring hub staffed partly by Royal Navy reservists, has become central to tracking these threats, issuing daily warnings that influence global shipping routes and commodity prices. This disruption mirrors historical chokepoint crises but on a scale not witnessed since the 1980s tanker war.
Oil markets reacted sharply to the developments. Brent crude climbed above $119 per barrel following the initial wave of retaliatory strikes, marking a significant jump from pre-conflict levels. Gulf benchmarks tied to Oman crude exceeded $166 per barrel at points, reflecting acute local supply concerns. Prices have remained elevated even as they eased slightly in subsequent sessions, with Brent settling around $107 per barrel on March 20 after a modest decline. The weekly gain still exceeded 4%, driven by the persistence of shutdowns that have removed an estimated 7 million to 10 million barrels per day from global supply, equivalent to 7% to 10% of worldwide demand.
Analysts and market participants have flagged substantial upside risks. Goldman Sachs highlighted that ongoing supply shocks could keep prices above $100 per barrel into 2027, with the potential for further escalation. Projections from Saudi officials suggested that if disruptions persist into late April, Brent could climb past $180 per barrel, though such levels would likely trigger demand destruction through consumer shifts, such as reduced driving or industrial cutbacks, and possibly contribute to a global recession. Traders have placed significant bets on prices reaching $130 to $150 in the coming months, with some scenarios envisioning even higher figures if the Strait remains closed. Energy consulting firms like Wood Mackenzie have noted that $200 per barrel is not outside the realm of possibility in 2026 under worst-case conditions.
Saudi Arabia, the region's largest producer, has expressed particular concern about rapid price spikes. Officials there view extreme increases as detrimental to long-term market stability, preferring modest gains that preserve market share. High prices risk casting producers as beneficiaries of conflict they did not initiate, while also prompting structural changes in consumption patterns that could permanently reduce demand. Aramco has insisted on using volatile regional benchmarks for pricing, despite some customer hesitation, as physical shortages intensify with depleting storage inventories. Saudi light crude has traded around $125 per barrel in some Asian markets via Red Sea routes.
The conflict's economic ripples extend beyond energy. In the United States, average gasoline prices have risen to $3.88 per gallon, up from $2.93 a month earlier, with diesel reaching $5.10 per gallon and placing pressure on transportation-dependent industries. Federal Reserve officials have warned that sustained higher energy costs could fuel inflation while dampening growth and employment. European and Asian nations, heavily reliant on Gulf supplies after diversifying away from Russian energy, face acute challenges, including currency pressures and rising import costs.
Efforts to mitigate the crisis have emerged from multiple quarters. The United States has considered releasing oil from its Strategic Petroleum Reserve and temporarily lifting sanctions on Iranian crude already loaded on tankers to ease supply constraints. Treasury officials indicated such measures could add meaningful volumes to the market. A joint statement from Britain, France, Germany, Italy, the Netherlands, and Japan expressed readiness to support secure passage through the Strait and work with producers to boost output. The International Energy Agency has authorized coordinated releases from strategic reserves.
A notable development came when Israeli Prime Minister Benjamin Netanyahu stated that Israel would no longer target Iran's energy infrastructure, following reported pressure from U.S. President Donald Trump. This announcement contributed to a pullback in prices on March 20, though analysts cautioned that broader tensions persist, with potential for renewed volatility if incidents continue. Experts from firms like Kotak Securities and Nuvama Institutional Equities projected Brent could rise to $120 in the near term and potentially $150 if the conflict extends beyond a month.
The situation remains fluid, with maritime traffic showing tentative signs of gradual recovery in some areas, yet the threat of further Iranian strikes and the involvement of major powers keep markets on edge. The conflict has already reshaped energy flows, delayed high-level diplomatic engagements, and drawn in military assets from the U.S. and its allies. While de-escalation signals offer some relief, the underlying risks to global supply chains and economic stability underscore the fragility of energy markets in the face of geopolitical shocks. As the crisis enters its next phase, the balance between military objectives and economic consequences will likely determine whether prices stabilize or climb further into uncharted territory. 

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