The global oil market is facing a worst-case set of outcomes as the war between the United States and Iran expands across large parts of the Middle East, with no clear off-ramp in sight. That raises the risk of prolonged supply disruptions that could slow global economic growth.

What is happening in the Strait of Hormuz and regional energy supply

Oil tanker traffic through the Strait of Hormuz has effectively stalled, the world’s most important maritime corridor for oil shipments, after shipping companies took precautionary steps and suspended passage through the chokepoint. Energy consultancy data indicates that roughly one-third of the world’s seaborne oil exports passed through the strait during 2025. The Strait of Hormuz is one of the most sensitive routes in global energy trade, linking the Gulf to the Indian Ocean.

Iran has also widened its retaliatory strikes to include regional energy facilities. Qatar announced a suspension of liquefied natural gas production after key facilities were hit by drone attacks. This matters because about 20% of global LNG exports come from Gulf countries, particularly Qatar, and move through the same highly sensitive sea lanes.

Natasha Kaneva, head of global commodities research at JPMorgan Chase & Co., said the prior assumption that an unprecedented disruption was unlikely has been proven wrong. She added that the war has already produced a near-complete halt in shipping through the strait in what she described as one of the most turbulent moments in modern maritime trade.

Crude prices rose more than 6% on Monday after jumping more than 12% earlier in the same day, while European natural gas prices surged more than 40%. Prices are expected to rise further depending on how long the war lasts and whether Iran targets energy infrastructure across the Gulf.

In the United States, drivers are expected to face higher fuel costs in the coming days. Gasoline prices could rise by $0.10 to $0.30 per gallon over the next week as crude costs climb.

Oil and gas price scenarios

Commodity analysts expect Brent crude to move above $100 per barrel, while European natural gas prices could exceed €60 per megawatt-hour if Tehran hardens its stance and continues attacks on energy facilities in neighboring countries, according to Bank of America. The bank also said a prolonged disruption in the strait could add another $40 to $80 per barrel to Brent.

If the war lasts more than three weeks, Gulf countries could run out of storage capacity as unsold crude accumulates without an export outlet, potentially forcing some producers to cut output. In that scenario, Brent could reach $120 per barrel, according to JPMorgan estimates.

If Iran imposes a full closure of the Strait of Hormuz using naval mines and anti-ship missiles, prices could spike sharply toward $200 per barrel, according to Deutsche Bank.

Historical comparison and other risks

The last time oil reached $100 per barrel was after Russia’s invasion of Ukraine in 2022, when US gasoline prices hit record levels above $5 per gallon.

Kaneva warned that a breakdown of Iran’s political system could pose an even larger supply risk. Iran produces more than 3 million barrels per day, and that output could be threatened if internal unrest or civil conflict erupts, a scenario that could push oil prices up by more than 70% in such cases.

A downside scenario

If fighting ends quickly, oil could return to a $60 to $70 per barrel range, according to Bank of America, especially if de-escalation happens within just a few days.

However, the United States and Iran still appear entrenched in their positions. Former Iranian national security adviser Ali Larijani rejected negotiations with the United States, saying the joint US-Israeli attack pushed the region into an unnecessary war.

US stock indices fell broadly at the start of trading on Tuesday as war and military operations between the United States and Iran escalated.

The US-Israeli strikes resulted in the death of Iran’s Supreme Leader Ayatollah Ali Khamenei, in what marks a major turning point for the Islamic Republic and one of the most significant developments since 1979.

In response, Iranian officials vowed a strong retaliation, heightening fears of a wider regional conflict, particularly as explosions were reported in several Gulf cities.

In early trading, as of 14:51 GMT, the Dow Jones Industrial Average dropped 2.1% (or 1,009 points) to 47,895. The broader S&P 500 declined 1.8% (or 137 points) to 6,744, while the Nasdaq Composite fell 2.1% (or 467 points) to 22,282.

Heavy losses at the open of Wall Street as Dow plunges more than 1,000 points

US stock indices fell sharply at the start of Tuesday’s session amid escalating war and military operations between the United States and Iran.

The US-Israeli strikes killed Iran’s Supreme Leader Ayatollah Ali Khamenei, marking a pivotal moment for the Islamic Republic and one of the most consequential events since 1979.

Iranian officials pledged a forceful response, increasing concerns about a broader regional escalation, particularly after reports of explosions in multiple Gulf cities.

By 14:51 GMT, the Dow Jones Industrial Average was down 2.1% (1,009 points) at 47,895, the S&P 500 had fallen 1.8% (137 points) to 6,744, and the Nasdaq Composite was lower by 2.1% (467 points) at 22,282.

Bitcoin held steady against the US dollar on Tuesday morning, posting a slight gain after a sharp sell-off over the weekend amid continued escalation between the United States and Iran.

The world’s largest cryptocurrency by market value had fallen to nearly $63,000 during the weekend, as investors reduced exposure to high-risk assets and shifted toward safe havens such as gold and the US dollar. It later recovered part of its losses to trade just below the $67,000 level.

Since the beginning of the year, Bitcoin has lost around one-third of its value, while the total cryptocurrency market capitalization has declined by about $350 billion compared with levels a month ago, according to data from CoinMarketCap.

Market turbulence this week followed US strikes on Iran, which reportedly resulted in the death of Iran’s Supreme Leader Ali Khamenei, prompting Tehran to launch a series of attacks on US bases across the Middle East.

The escalating conflict has heightened global economic uncertainty, particularly after the closure of the Strait of Hormuz, one of the world’s most important oil transit routes, driving crude prices higher. Rising energy costs are fueling concerns that inflation could accelerate, especially in countries heavily dependent on oil and gas imports.

Ethereum, the cryptocurrency tied to the Ethereum network, rose about 0.9% to trade just below the $2,000 level.

Meanwhile, shares of crypto-related companies did not mirror the rebound in pre-market US trading, with Coinbase and Strategy — the software firm holding large Bitcoin reserves — appearing set to open the session lower.

Oil prices extended their strong rally on Tuesday, with benchmark crude contracts rising about 8% and marking a third consecutive session of gains, as the conflict between the United States and Israel on one side and Iran on the other widened, disrupting fuel shipments and intensifying fears of further oil and gas supply outages from the Middle East.

Brent crude futures climbed $6.05, or 7.8%, to $83.79 per barrel by 11:43 GMT, after touching their highest level since July 2024 at $85.12. US West Texas Intermediate crude rose $5.31, or 7.5%, to $76.54 per barrel, having earlier reached its highest level since June at $77.53.

The US-Israeli air campaign against Iran has expanded since Israel’s initial strikes on Saturday, with Israel targeting Lebanon while Iran responded with attacks on energy infrastructure in Gulf states and oil tankers in the Strait of Hormuz, through which roughly one-fifth of global oil and liquefied natural gas supplies pass.

Oil tankers and container ships have avoided the strait after insurers withdrew coverage for vessels operating in the region, as global shipping costs for oil and gas surged. Fears escalated further after Iranian media reported that a senior Islamic Revolutionary Guard Corps official announced the closure of the Strait of Hormuz and warned that any vessel attempting to transit would be targeted.

Analysts at ING said concerns extend beyond oil flows through the strait, with the greater risk being further Iranian attacks on regional energy facilities, which could result in more prolonged supply disruptions.

In additional developments, official media reported that authorities in the United Arab Emirates were dealing with a serious fire at Fujairah port, a major oil storage and export hub. Meanwhile, shipments of Iraqi Kirkuk crude from Turkey’s Ceyhan port were halted, according to a shipping industry source.

Since the onset of hostilities, oil and gas facilities across several countries have either been shut down due to direct damage or as a precautionary measure. Qatar halted liquefied natural gas production, Israel suspended output at some gas fields, Saudi Arabia shut its largest refinery, and production in Iraq’s Kurdistan region nearly came to a standstill.

Disruptions have also spread to gas markets, with Dutch benchmark gas futures, UK gas prices, and LNG prices in Europe and Asia all surging.

Analysts expect oil prices to remain elevated in the coming days as markets assess the fallout from military escalation. Bernstein raised its 2026 Brent price forecast to $80 per barrel from $65 but said prices could climb to between $120 and $150 if the conflict persists in a prolonged and severe manner.

Refined product contracts also surged amid risks to Middle Eastern refining facilities. US ultra-low sulfur diesel futures jumped more than 11% to $3.22 per gallon after hitting a two-year high on Monday, while gasoline futures rose 5% to $2.49 per gallon. In Europe, gasoil futures climbed 13% to $997.80 per metric ton, following an 18% surge in the previous session.