The US, Israel, Iran crisis and the ensuing volatility
On 28th February 2026, the global oil market moved from surplus to crisis in less than 48 hours. US and Israeli strikes on Iran were followed by Iran’s effective closure of the Strait of Hormuz, the waterway through which 20 mb/d of crude, petroleum products, and LNG normally transit. Brent, which had ended 2025 at $61/bbl in a market tracking toward its largest surplus since the pandemic, crossed $100/bbl in March for the first time since 2022 and reached $115/bbl by month end. This is not simply another geopolitical oil spike. It is the largest disruption to the physical architecture of global energy trade in modern history.
The scale of the disruption is significant. Prior geopolitical shocks removed 4-6% of global oil supply, whereas a full Hormuz closure threatens ~20%. Existing bypass infrastructure like Saudi Arabia’s East-West Pipeline and the UAE’s ADCOP pipeline combined covers 13% of normal flows. Rerouting provides partial relief, and a return to normalcy would likely require diplomatic intervention or military de-escalation.
The price action is not a classic supply shock. Oil has exhibited repeated spike-and-retracement moves rather than a clean, sustained repricing. That pattern reflects a market that’s pricing severe geopolitical risk while being partially cushioned by International Energy Agency (IEA) strategic reserve releases of 400 million barrels, limited alternative routing, and Russian supply filling the gap for Asian buyers. Those cushions are finite. If the Strait remains blocked beyond 60-90 days, their effectiveness wanes and prices realign with physical supply reality.
