Crude oil prices surged past $90 a barrel Friday, marking the largest weekly increase since the onset of the COVID-19 pandemic, as the conflict in Iran escalated and disrupted global energy supplies. The price of Brent crude reached as high as $91.89 a barrel, up from approximately $72.50 before the conflict began, according to reports.
The war, triggered by a U.S.-Israel assault on Tehran, has already suspended roughly 20% of global crude and natural gas supply, according to JP Morgan analysts. Iranian targeting of ships in the Strait of Hormuz, a critical waterway connecting the Persian Gulf to the Indian Ocean, and attacks on energy infrastructure across the region are the primary drivers of the disruption. Approximately 140 million barrels of oil – equivalent to 1.4 days of global demand – are currently unable to reach global refiners due to the near-complete shutdown of the Strait.
Storage facilities in the Middle East Gulf are rapidly reaching capacity, prompting Iraq to curtail oil production. Kuwait and the United Arab Emirates are expected to follow suit, sources within regional oil companies indicate. “At some point soon, everyone will also shut in if vessels do not come,” a source with a state oil company in the region said, speaking on condition of anonymity.
Restarting oilfields forced offline by the shipping disruptions will not be a swift process. Amir Zaman, head of the Americas commercial team at Rystad Energy, explained that even if the conflict ends imminently, it could take “days or weeks or months, depending on the types of fields, age of the field, the type of shut in that they’ve had to do” to restore production to previous levels.
Beyond disruptions to shipping, Iranian forces have directly targeted regional energy infrastructure. Qatar declared force majeure on its substantial LNG exports Wednesday following drone attacks, with a return to normal production potentially a month away, sources told Reuters. Qatar supplies 20% of global LNG. Saudi Aramco’s Ras Tanura refinery and export terminal has also been closed due to attacks, though the extent of the damage remains undisclosed.
The White House has defended the action against Iran, asserting the country posed an imminent threat to the United States, though details of that threat have not been publicly released. President Trump has also cited concerns about Iran’s nuclear program.
The disruption is reverberating through Asian economies, which rely on the Middle East for approximately 60% of their crude oil imports. In India, Mangalore Refinery and Petrochemicals has declared force majeure on gasoline export cargoes, joining a growing number of regional refineries unable to fulfill sales contracts. Refineries in China have reduced operations, and the country has asked its own refineries to suspend fuel exports. Thailand and Vietnam have also suspended fuel and crude shipments, respectively.
Russia is benefiting from the supply disruption, with prices for Russian crude cargoes increasing. The U.S. Has issued a 30-day waiver to Indian refiners allowing them to purchase Russian crude to offset the loss of Middle Eastern supplies, reversing previous pressure on India to reduce its reliance on Russian oil.
European energy markets are facing a compounded crisis. Already struggling with reduced gas supplies due to sanctions imposed on Russia following the invasion of Ukraine in 2022, European consumers are now contending with escalating fuel prices. Japan, the world’s second-largest LNG importer, has seen baseload power futures for the fiscal year starting in April jump by more than a third on the EEX exchange. In South Korea, drivers have been queuing at petrol stations in anticipation of price increases.
The U.S. Has offered naval escorts to oil tankers and pledged insurance support to vessels operating in the region. However, intelligence and military sources suggest Iran retains the capacity to sustain drone attacks on shipping for months, casting doubt on the long-term security of the Strait of Hormuz. Analysts at Natixis CIB have noted that, even as physical damage from Iranian strikes has not yet been considered structural, the risk remains as long as the conflict continues.
The conflict could also spur countries to replenish their strategic petroleum reserves in the coming weeks and months, further increasing demand and supporting prices.