Global crude prices spiked late Monday—briefly rising more than 9%—as the conflict with Iran entered a third day and tanker traffic through the Strait of Hormuz largely halted. Brent crude traded in the high $70s Monday morning, a sharp increase from levels before the U.S. and Israel struck Iran, but far below the most extreme forecasts.
Traders and analysts described market reactions as measured rather than panicked. Short-term nervousness was apparent: stock markets sold off early, with the Dow Jones Industrial Average falling as much as 600 points intraday before finishing down about 70 points, while the S&P 500 ended roughly flat. But investors largely adopted a wait-and-see stance rather than rushing to drive prices far higher.
Risks of a prolonged disruption remain significant. Analysts warn oil could top $100 a barrel if flows are disrupted for an extended period or if the fighting spreads and damages regional energy infrastructure. Over the weekend Saudi officials reported downing drones targeted at a refinery, and Qatar Energy said two natural gas facilities were attacked.
Short-term fuel and gas impacts
When oil trading resumed Sunday night after the weekend, prices briefly climbed above $80 a barrel before easing back. Gasoline analysts estimate U.S. pump prices could rise on average 10 to 30 cents per gallon in the coming days, with some stations seeing increases of as much as 85 cents. About 20% of global oil consumption normally transits the Strait of Hormuz, so disruptions there have immediate effects on shipping and insurance and on nearby markets.
Four vessels have been struck in Gulf waters since the fighting began, and concerns among shippers and insurers have effectively halted tanker transits through the strait. The route is also important for liquefied natural gas shipments; European natural gas benchmarks have jumped more than 20% while U.S. spot natural gas prices have stayed mostly within their recent range. As the world’s largest LNG exporter after investing in export terminals, higher global prices can benefit U.S. exporters but also raise domestic electricity and heating costs.
Why prices have not surged further
Market observers point to several factors that have limited a larger price spike. Recent oversupply allowed some countries and traders to build inventories—China in particular holds substantial oil stocks onshore and afloat—providing a buffer against a short-term cutoff. Many traders are also treating the episode as potentially brief, pricing in the possibility of a quick de-escalation.
Still, experts warn these buffers are temporary. If the conflict continues beyond a few weeks, strategic reserves, rerouted cargoes and elevated floating inventories could be exhausted, creating a much tighter market.
OPEC+ actions and stranded barrels
OPEC+ agreed over the weekend to raise production by more than expected, which typically would ease prices. But with tankers avoiding the Strait of Hormuz, much of that additional output may be unable to reach global markets. Energy analysts cautioned that the production boost could be moot if regional barrels are stranded, and some producers such as Iraq might have to curtail or shut in output if they cannot export.
Iran has not declared a full naval blockade, but a series of selective drone and rocket strikes has so far been enough to convince shippers and insurers that the risk of transiting the strait is too high, effectively stopping tanker traffic. The duration and geographic spread of the fighting remain the key variables determining whether the current price moves are temporary or the start of a more sustained energy shock.