https://kpler.com/blog/us-iran-conflict-strait-of-hormuz-crisis-reshapes-global-oil-markets
Blog/Market Update/Current postMarch 1, 2026US-Iran conflict: Strait of Hormuz crisis reshapes global oil marketsThe US-Iran conflict has put the Strait of Hormuz on a knife's edge. We break down what this supply disruption means for oil prices, jet fuel, LNG, and global energy flows - and what commodity market professionals need to know right now.
The United States has struck Iran, killing the Supreme Leader and triggering an active military conflict now in its second day. Iran has retaliated beyond symbolic measures - striking Gulf neighbours including the UAE and Saudi Arabia, and threatening to close the Strait of Hormuz. What began as a potentially contained operation has rapidly broadened into a regional crisis with direct implications for global energy supply, freight markets, and commodity pricing.
This is no longer a geopolitical risk premium in the abstract. Supply is being disrupted in real time.
Market context: why the Strait of Hormuz is the epicentre
The Strait of Hormuz is the world's single most critical energy chokepoint. Any meaningful closure - or even a sustained de facto closure driven by insurance withdrawal - would trigger supply shocks across multiple commodity classes simultaneously.
The Strait is not formally closed. Kpler vessel tracking shows limited traffic continuing - primarily Iranian and Chinese-flagged ships - but commercial operators, major oil companies, and insurers have effectively withdrawn from the corridor. Insurance premiums had already reached six-year highs ahead of the strikes.
The result: A de facto closure for most of the global shipping community, comparable in character to the Red Sea disruption - but with far larger volumes at stake.
We monitor vessel movements and cargo flows to inform this assessment.
Iran's retaliation strategy: no limits on the table
Iran's response has departed sharply from the largely symbolic retaliation seen during the June 2025 conflict. Missile and drone strikes have hit UAE territory - including the Jebel Ali port, multiple five-star hotels, and Abu Dhabi port infrastructure - as well as targets in Saudi Arabia and Bahrain.
Iran had pre-positioned warheads near regional borders in anticipation of this scenario. This suggests the broader escalation was planned, not improvised.
With the leadership structure under sustained attack, Iranian decision-making has shifted from coercive signalling towards existential defence. All options - including infrastructure strikes and Strait interdiction - must now be treated as live risks.
Oil price outlook: Brent set for a sharp Monday open
Oil markets closed Friday with Brent at approximately $73/bbl. The consensus among analysts points to an open in the $85-90 range on Monday, with some scenarios putting the intraday high above $88.
Why this conflict presents a more severe supply picture than June 2025:
By end of week, the majority of the market indicate that Brent will settle back into the $70-80 range - implying a spike-and-partial-recovery pattern. This assumption carries significant downside risk if Iranian retaliation escalates further.
On the WTI-Brent spread: We expect the spread to blow out, driven by two dynamics:
Gasoil (diesel) faces the most acute physical pressure in the near term:
Jet fuel disruption will follow with a slight lag but is likely to be more persistent. Kuwait is a central hub in regional jet supply. Any sustained disruption to Strait transit will translate directly into European aviation supply tightening. The market has learned from June 2025 that the jet crack can remain elevated for weeks once a genuine supply shortage emerges.
Gasoline is relatively better insulated. Global supply is more distributed and the arbitrage network more flexible, though Asian turnaround season adds some vulnerability at the margin.
OPEC Plus held its scheduled meeting and approved a modest production increase of 206,000 barrels per day - a figure that surprised analysts expecting a larger response given the conflict. The decision reflects deliberate risk management rather than market indifference.
The next scheduled OPEC Plus meeting is 5 April, though the group can convene and adjust policy at any time.
One critical constraint: A significant portion of Gulf spare capacity cannot reach global markets if the Strait of Hormuz remains inaccessible. Saudi Arabia's East-West Pipeline (capacity: 7 million b/d) and the UAE's Fujairah pipeline offer partial alternatives, but terminal infrastructure at Jeddah limits throughput. These routes could sustain a portion of displaced volume but would not offset a full Strait closure.
The conflict is materially improving Russia's competitive position in crude oil markets. With Middle East barrels facing logistical disruption, both India and China face strong incentives to deepen reliance on Russian supply:
China also holds significant strategic crude reserves accumulated during the period of global oversupply. This provides a buffer in the short term but positions Beijing as a potential re-exporter to third markets if the supply crunch deepens.
The LNG impact has received less market attention but warrants monitoring:
The JKM-TTF spread (the Asia-Europe LNG price differential) is expected to widen as Asian buyers compete for alternative supply. US LNG export infrastructure is already operating near capacity, limiting the ability of American exporters to meaningfully fill the gap.
Takeaway 1: The Strait of Hormuz is effectively closed for commercial shipping despite technically remaining open. Insurance withdrawal is doing the work that physical blockade has not - the outcome for cargo flow is largely the same.
Takeaway 2: This is a real supply disruption, not a risk premium event. Physical barrels are being affected across crude, products, LPG, and LNG simultaneously. Treat the price spike accordingly.
Takeaway 3: The WTI-Brent spread and the back end of the WTI curve represent the clearest near-term trading signal. Producer hedging pressure on the long end will drive spread widening independent of prompt fundamentals.
The conflict's trajectory hinges on three variables:
Base case: A conflict lasting at least one week, with partial de-escalation driven by coercive diplomacy rather than military resolution.
Tail risk: A sustained Strait closure with full Gulf infrastructure targeting remains low probability but would represent an unprecedented supply shock. No adequate offset exists from OPEC spare capacity, strategic reserves, or alternative routing combined.
We expect Brent crude to open Monday in the $85-90 range, up from Friday's close near $73/bbl. Some scenarios put the intraday high above $88. By week's end, the majority view points to Brent settling back into the $70-80 range, though this assumes no further escalation.
How does this conflict affect global energy security?
The conflict directly threatens approximately 20% of global oil supply that transits the Strait of Hormuz daily. Asian energy security is most exposed, with India and China facing acute supply risks across crude, LPG, and LNG.
Technically, no. Vessel tracking shows limited traffic continuing. However, the withdrawal of commercial operators, major oil companies, and insurers has created a de facto closure for most global shipping. Insurance premiums at six-year highs make transit economically unviable for most operators.
OPEC Plus retains approximately 3.5 million barrels per day of spare capacity, concentrated in Saudi Arabia and the UAE. However, a significant portion of this capacity cannot reach global markets if the Strait remains inaccessible. Alternative pipeline routes exist but cannot fully offset a Strait closure.
Our base case is a conflict lasting at least one week, with partial de-escalation through diplomacy. The tail risk scenario - sustained Strait closure - remains low probability but would extend disruption significantly.
This analysis is based on Kpler market intelligence and expert commentary current as of the time of publication. For real-time data on Strait of Hormuz flows, tanker movements, and product crack spreads, request access to Kpler here.
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