The International Energy Agency has described the loss of 20 million barrels of oil a day as the largest supply disruption ever recorded. Global energy markets have whipsawed with dramatic price fluctuations, including Brent crude's steepest one-month gains. Brent crude oil prices climbed to $105.32 per barrel, up from roughly $70 before the war began, while on Tuesday, Brent rose $4.70, or 6.1%, to $82.44 a barrel, and U.S. crude rose $4.43, or 6.2%, to $75.66. Brent was on track for its highest close since July 2024 and WTI for its highest since January 2025. U.S. gasoline futures climbed about 4% to $2.47 a gallon, their highest since July 2024, while crack spreads, which measure refining profit margins, soared to their highest since an unspecified date.
Key energy infrastructure has suffered significant damage. Iran has responded with strikes against energy infrastructure in Gulf countries and tankers in the Strait of Hormuz. According to QatarEnergy, Iran hit Qatar's Ras Laffan natural gas terminal, wiping out 17% of Qatar's LNG export capacity, with repairs taking up to five years. Since the start of attacks, oil and gas infrastructure in several countries has shut because of damage or as a precaution, including Qatar stopping LNG production, Israel stopping production at some gas fields, Saudi Arabia shutting its biggest refinery, and output in Iraq dropping.
A severe shipping crisis has ensued. Tankers and container ships are avoiding the Strait of Hormuz after insurers cancelled coverage for vessels and global oil and gas shipping rates soared. Concerns increased after Iranian media reported that Iran will fire on any ship trying to pass through the strait. Tankers of crude oil and LNG are being diverted mid-voyage, such as from Europe to Asia, due to the crisis. Saudi oil giant Aramco is attempting to reroute some crude exports to the Red Sea to bypass the Strait of Hormuz where the risk of attacks has slowed shipping to a near halt.
The economic risks are profound. Oil price shocks like this have historically led to global recessions and raised the risk of stagflation. According to Gita Gopinath, global economic growth could be 0.3 to 0.4 percentage points lower if oil prices average $85 a barrel in 2026.
Governments have launched emergency responses. Global leaders are releasing emergency oil reserves, such as 400 million barrels by the International Energy Agency, to ease price pain. President Donald Trump is tapping into the Strategic Petroleum Reserve, lifting sanctions on Russian and Iranian crude, and temporarily waiving the Jones Act. Despite these interventions, crude oil surpassed $100 a barrel and U.S. gasoline averages $4.06 a gallon.
Europe is experiencing deep energy-linked frustration and divisions similar to the 2022 crisis after Russia's invasion of Ukraine, with leaders scrambling for short-term solutions. Energy-intensive industries in Britain and Europe, such as steel and chemicals, are severely impacted by rising energy costs from the conflict. British wholesale gas prices climbed as high as 171p a therm after the invasion began, up from 78p a therm at the end of February. The UK imports about 70% of its gas, leaving it vulnerable to price swings. The chemicals sector in Britain has seen production output fall by 60% since 2021, with at least 25 sites closing.
Europe's energy landscape has shifted significantly from its historical reliance on Russia. The EU has reduced its reliance on Russian energy, with only 2% of oil imports now from Russia, and plans to end all Russian gas imports by next year. Before Russia's invasion of Ukraine, Russia supplied an estimated 55% of German natural gas imports.
The shockwaves are reaching consumer goods through petrochemicals. Petrochemicals, derived from oil and gas, are embedded in many consumer products and are a growing driver of fossil fuel demand. They account for 15%-16% of oil demand and are among the fastest-growing uses. The war is affecting the price of children's stuffed toys due to increased costs for petroleum-derived materials like polyester and acrylic. Petrochemicals are used in more than 6,000 consumer products, including computer keyboards, lipstick, and medical equipment. Fertilizer prices have also increased, with urea up 50% and ammonia up 20% since the war, impacting agriculture.
The conflict has unleashed environmental damage. The war has caused air pollution from burning oil and gas fields, with over 400 environmentally concerning incidents recorded. Black rain fell near Tehran due to strikes on fuel depots and a refinery, posing health risks from soot and toxic chemicals.
In response, some nations are accelerating nuclear power plans. The Iran war is causing some nations in Africa and Asia to boost nuclear power generation and accelerate long-term nuclear plans. South Korea is increasing generation at its nuclear plants and speeding up maintenance at offline reactors. Taiwan and Japan are reversing policies that shuttered nuclear sites after the 2011 Fukushima disaster.
Regional impacts are spreading. The war has widened, with Iraq cutting production by nearly 1.5 million barrels a day, and cuts could more than double within days as the country runs out of storage space for crude it cannot export due to the crisis. Citing the Strait of Hormuz, India and Indonesia said they were seeking alternative energy supplies. In China, supply disruptions were causing some refineries to shut or push ahead maintenance plans.
Geopolitical tensions remain high. Heightened tensions exist between Iran and the United States, with indirect talks continuing and President Donald Trump warning that military strikes remain an option if diplomacy fails. Washington has expanded its military presence in the region. Tehran has prepared contingency plans in case of war with the United States or Israel, including scenarios where senior leaders like Supreme Leader Ali Khamenei could be killed. The contingency planning is designed to ensure continuity of the Islamic Republic under extreme circumstances, with senior figures like security chief Larijani, parliament speaker Mohammad Bagher Ghalibaf, and former president Hassan Rouhani named as part of that structure. Larijani’s expanding role has reduced the visible influence of President Masoud Pezeshkian in day-to-day governance.
Internal Iranian politics are turbulent. During nationwide protests, Khamenei was the target of an internal effort led by Rouhani to sideline him from crisis management. Rouhani gathered several political figures, including former foreign minister Mohammad Javad Zarif, clerics from Qom, and individuals linked to the Revolutionary Guards, to discuss an alternative leadership arrangement. The effort ultimately failed, partly because Larijani did not support the initiative. According to Rouhani's office, the Le Figaro account is a US-Israeli fabrication aimed at creating doubt and concern in Iranian public opinion. Following the 12-day war with Israel, Khamenei appointed Larijani as secretary of the Supreme National Security Council, despite the Guardian Council previously disqualifying him from running in the presidential election. Iranian media widely republished the New York Times and Le Figaro reports but mostly avoided detailed analysis. The New York Times report portrays Larijani as a crisis manager operating across multiple arenas, from nuclear diplomacy to regional strategy and wartime planning.
Several critical unknowns persist. The exact timelines for repairs to damaged energy infrastructure, such as Qatar's Ras Laffan terminal, remain uncertain, affecting global supply projections. Diplomatic efforts to de-escalate the conflict and reopen the Strait of Hormuz, which the International Energy Agency calls the most important action to stabilize flows, are ongoing but their current status is unclear. Global governments have yet to outline comprehensive long-term economic plans to address potential recessions or stagflation beyond short-term measures like releasing oil reserves. Specific military actions and casualty figures from the conflict have not been widely disclosed.