US-Israeli Strikes on Iran Trigger Global Oil Crisis

The US and Israeli military strikes on Iran have sent global oil and gas markets spiraling, according to research. As oil prices hover near $100 per barrel, global attention is on the Strait of Hormuz, a narrow waterway through which flow enormous volumes of crude oil and liquefied natural gas. Shipments of oil and gas through the strait are at a standstill due to Iranian threats to tankers, research indicates. Benchmark US crude prices now hover near $95 per barrel, a significant rise from prewar levels in the low- to mid-$60 range, while international LNG prices have jumped more than 50 percent, although this spike has little direct effect on US consumers.

This escalation follows a period of heightened tension. The latest round of protests in Iran starting in December 2025 and the government’s repressive response, combined with the unresolved issue of Iran’s nuclear and ballistic missile programs, have raised the specter of renewed US and/or Israeli military action against the Islamic Republic, according to research. Multiple US–Iran conflict scenarios carry materially different risks for global oil infrastructure, transit routes, and prices. A more likely scenario, research suggests, is that President Trump avoids the use of military force and instead pursues a new “deal” with Iran on its nuclear and ballistic missile programs, including US inspections and the removal of enriched uranium, coupled with a demand for Iranian leadership change, possibly including the removal of Supreme Leader Ali Khamenei—an arrangement akin to the US removal of President Nicolás Maduro in Venezuela.

The immediate market impacts are severe. In a scenario involving direct kinetic attacks between the United States, possibly with Israel, and Iran, including strikes on oil infrastructure, prices would likely experience a significant shock, as both production sources and transit routes would be compromised simultaneously, research indicates. That impact would be buffered by a well-supplied market and currently low prices. Some bank analysts, including Barclays, see oil prices jumping from the mid-$60s per barrel to the $80 per barrel range in the short term in the event of an attack on Iranian military and government leadership. A more symbolic Iranian retaliation targeting US bases but not disrupting critical oil or gas production or blocking transit routes, similar to what Iran carried out in Qatar last year, would likely result in a more modest and less sustained price impact of $3–4 per barrel, according to research. Global oil markets are well integrated, so no matter how much oil the United States produces, a disruption in one part of the world, such as the Strait of Hormuz, will lead to a global spike in crude oil prices. Since the strikes, oil prices have at points soared to close to $120 a barrel, pushed up by strikes on shipping and energy infrastructure and the effective closure of the Strait of Hormuz, the world's busiest oil shipping channel. About a fifth of the world's oil passes through the strait, around 20 million barrels each day, according to estimates from the US Energy Information Administration. Because the cost of crude oil is the most important determinant of the price of gasoline and diesel, and crude oil costs have soared, US drivers suddenly are facing higher prices at the pump.

Regional vulnerabilities are acute. Across all scenarios, the Gulf Arab states would be exposed as targets of Iranian retaliation following any US and Israeli action against Iran, whether a blockade or a kinetic attack, research indicates. In the event of an attack, Iranian retaliation against US allies and partners in the Arabian Peninsula would put global oil infrastructure and associated transit ways at risk. The financial outlook of these states depends on regional stability, which could be tested by an Iranian leadership transition, including if the Islamic Revolutionary Guard Corps-led authority structure remains intact. Energy shipments from the Middle East have been at a standstill following Iran's threats to attack vessels that pass through a critical trade waterway as retaliation against US-Israeli strikes. The blockade has led to a global oil shortage which has rocked Gulf-reliant Asian countries hard, with the Philippines mandating four-day work weeks to save fuel, and Indonesia seeking ways to avoid burning through reserves that will last just weeks. The shortage has left countries scrambling for alternative crude suppliers outside of the Gulf, while others are tapping into their own oil reserves.

China, however, is testing its long-prepared resilience. China has long braced for a Gulf oil supply shock, but the Iran war's disruption of a key global shipping route is now putting its resilience to the test, according to research. China, the world's largest buyer of oil, is also feeling the strain. But the country sits in a better position than its neighbours, after years of statecraft that have prepared it for a global energy crisis. As the world's second-largest consumer of oil after the US, China uses an estimated 15 to 16 million barrels of oil daily, various market analysts told the BBC. The oil is mainly used for China's massive transportation network of cars, trucks and jets. Gulf countries are a major source of the oil China ships in, with barrels from Saudi Arabia and Iran accounting for more than 10% of its imports each, according to the US Energy Information Administration.

China's domestic energy buffers provide further insulation. Most of the country's imported crude oil, which comes from Iran and the Middle East through the South China Sea, is used as fuel to support factories and transportation, mainly in the southern half of China. The country's north, however, is mainly powered by oil produced domestically in major oilfields, along with pipeline imports from Russia, and these are not disrupted by the war in the Middle East. While many Asian countries have relied heavily on oil from Gulf nations, Russian oil accounts for nearly a fifth of China's energy imports. That makes Moscow by far Beijing's biggest oil supplier, despite sanctions from the US and Europe. Coal is also the dominant source of power for most of China's electricity, and is available in abundance locally. China is the world's largest coal producer, accounting for more than half of global production. Oil and gas meanwhile account for just over a quarter of China's total energy consumption.

The crisis unfolds against a complex global economic backdrop. According to a Ministry of Finance press release reported by major media, the main topics of the IMF and World Bank spring meeting week are the effects of the Middle East conflict on the global economy and creating jobs and growth in developing economies. IMFC members discussed the global macroeconomic and financial impact of current wars and conflicts including the war in Ukraine, the humanitarian crisis in Gaza, as well as the shipping disruptions in the Red Sea, research indicates. A soft landing for the global economy appears to be drawing closer. Economic activity has proved more resilient than expected in many parts of the world, though it continues to diverge across countries. Ongoing wars and conflicts continue to impose a heavy burden on the global economy. Even though inflation has fallen in most regions, owing to the unwinding of supply shocks and the effects of tight monetary policy, its persistence warrants caution. While risks to the outlook are now broadly balanced, downside risks remain, hinging on the near-term paths for inflation and interest rates, asset prices and financial stability, fiscal policy actions, as well as geopolitical developments. The global economy is also facing pressing structural challenges, including from climate change, elevated debt vulnerabilities, rising inequality, as well as the risk of geoeconomic fragmentation.

Clean energy technologies face their own vulnerabilities. But clean energy technologies, including wind, solar, batteries, and electric vehicles, are not immune from supply chain disruptions stemming from geopolitical disputes. China’s restrictions on the export of critical minerals are a prime example of how energy independence is not an inevitable consequence of a transition to a low-emissions future.

Potential mitigations are emerging, though with limitations. Although LNG trade has also been affected by disruptions in the Strait of Hormuz, natural gas markets are more fragmented, moderating the effects on prices for US consumers. One possible avenue is for the United States, as the world’s largest LNG exporter and major EU supplier, to step up shipments. Construction is underway to expand US export capacity, but most of these facilities will come online in the coming years, not weeks or months.

Amid the global turmoil, Finland's Finance Minister Riikka Purra attended the International Monetary Fund and World Bank spring meetings in Washington, USA, from April 15-17, according to major media reports. Purra participated in high-level Ukraine discussions at the spring meetings, attended the climate coalition meeting of finance ministers, and attended the ministerial meeting of the Financial Action Task Force on anti-money laundering and counter-terrorist financing. President Alexander Stubb and Foreign Minister Elina Valtonen recently visited Washington, major media reports.

Finland's support for Ukraine was a key focus. Finland’s Minister of Finance Riikka Purra confirmed Finland’s strong support for Ukraine at meetings in Washington DC last week. Finland will participate in NATO’s Prioritised Ukraine Requirements List and endorse the using of frozen Russian assets to support Ukraine, research indicates. The Prioritised Ukraine Requirements List is designed to facilitate the purchase of defence materiel that only the United States can provide, such as air defence systems to protect civilians. In Washington DC, Minister Purra also highlighted the EU-endorsed legislative initiative to use Russian frozen assets to support Ukraine. The European Commission is expected to submit a legislative proposal on the use of Russia’s frozen assets in early November if the European Council endorses the initiative today.

International coordination on Ukraine aid continued. Secretary of the Treasury Janet L. Yellen met with Ministers of Finance Elisabeth Svantesson of Sweden, Riikka Purra of Finland, and Gintarė Skaistė of Lithuania on the sidelines of the IMF-World Bank Spring Meetings in Washington, DC. Secretary Yellen discussed ways to continue providing near-term financial assistance to Ukraine, as well as ways to unlock the value of immobilized Russian sovereign assets to support Ukraine’s continued resistance and long-term reconstruction.

Key unknowns persist in the crisis. The effectiveness of current diplomatic efforts to de-escalate the US-Iran conflict and reopen critical shipping routes remains unclear. Specific measures being taken to secure alternative oil supplies for countries affected by the Strait of Hormuz blockade have not been detailed. The exact timeline and outcome of the EU's legislative proposal on using frozen Russian assets to support Ukraine is pending, with the proposal expected in early November if endorsed. The extent to which clean energy supply chains are being disrupted by the geopolitical tensions, and what mitigation strategies are in place, are also not fully known.