The conflict has caused the loss of 20 million barrels of oil a day, described by the International Energy Agency as the largest supply disruption in the history of the global oil market, according to the agency. The Strait of Hormuz, a vital trade route for about 20% of global oil and gas, has been effectively shut down due to the conflict. Oil prices soared about 6% to their highest since 2024 on Tuesday, rising for a third session as the war widened, disrupting energy shipments from the Middle East and stoking fears of a prolonged conflict. 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, with Brent on track for its highest close since July 2024 and WTI for its highest since January 2025.
Global energy markets have whipsawed, with Brent crude registering steep gains and dramatic daily fluctuations. Brent crude oil climbed to $105.32 per barrel, up from roughly $70 before the war began, according to market data. The International Energy Agency and its members are releasing 400 million barrels of emergency oil reserves, the largest volume in its history, the agency said. Some oil-producing nations in the Middle East have halted production, taking about 10 million more barrels per day off the market, according to industry reports. Iraq, the No. 2 crude producer in OPEC behind Saudi Arabia, has cut 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.
The Strait of Hormuz crisis is central to the supply shock. Roughly 15 million barrels of crude oil and 5 million barrels of oil products passed daily through the Strait of Hormuz before the war, according to shipping data. Iran has responded with strikes against energy infrastructure in Gulf countries and tankers in the Strait of Hormuz, through which a fifth of the world's oil and liquefied natural gas typically passes. 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 of Hormuz. 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, according to sources.
Regional energy infrastructure has sustained significant damage. 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. 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, according to QatarEnergy.
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 companies 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. Somers Forge's monthly gas bill has soared from £150,000 to as high as £250,000 based on recent prices, according to Tammy Inglis.
The chemicals sector in Britain has seen production output fall by 60% since 2021, with at least 25 sites closing, according to the Chemicals Industry Association. 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.
Global supply chains are being rerouted in response. Tankers of crude and LNG are being diverted from Europe to Asia due to the crisis. Commodity trading houses like Vitol, Trafigura, Glencore, Gunvor, and Mercuria are attempting to reroute disrupted energy supplies.
Asian countries are turning to coal as the Iran war disrupts oil and gas shipments, risking increased emissions and slowed renewable energy transition. India is burning more coal to meet higher summer demand, with peak electricity demand expected to be 270 gigawatts. China has built record coal power generating capacity since 2021 to improve energy security. Indonesia, the world's largest exporter of thermal coal, is prioritizing domestic use over exports due to the crisis.
The crisis is accelerating a global nuclear power revival. The Iran war is causing some nations in Africa and Asia to boost nuclear power generation and spur atomic energy plans. Nuclear power provides about 10% of global electricity, with 31 countries using it and 40 considering or preparing to build plants, according to the International Atomic Energy Agency. South Korea is increasing nuclear power generation and speeding up maintenance at offline reactors. Taiwan is considering restarting mothballed nuclear reactors due to the crisis. Japan has signed a $40 billion reactor deal with the U.S. and a nuclear fuel recycling agreement with France since the war started.
Fertilizer and industrial impacts are compounding the crisis. Urea prices are up 50% and ammonia prices up 20% since the war due to disruptions in fertilizer exports through the Strait of Hormuz. Petrochemicals account for 15%-16% of oil demand and are among the fastest-growing uses of fossil fuels, according to Fredric Bauer. U.S. gasoline futures climbed about 4% to $2.47 a gallon, their highest since July 2024.
Environmental damage from the conflict is a growing concern. The Iran war has unleashed pollutants that threaten agriculture, drinking water, and health, with environmental damage that could persist for decades. More than 400 environmentally concerning incidents related to the war have been recorded so far, according to the Conflict and Environment Observatory.
Geopolitical tensions remain high. Heightened tensions exist between Iran and the United States, with indirect talks ongoing and President Donald Trump warning that military strikes remain an option if diplomacy fails. The United States has expanded its military presence in the region.
Iran has prepared contingency plans for extreme scenarios. The New York Times cited Iranian officials as saying 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, according to the report.
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. The report also suggested that Larijani's expanding role has reduced the visible influence of President Masoud Pezeshkian in day-to-day governance.
Controversial reports have emerged about internal dynamics. Le Figaro published an account alleging that during nationwide protests, Khamenei was the target of an internal effort led by Rouhani to sideline him from crisis management. According to the French newspaper, 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. Le Figaro said the effort ultimately failed, partly because Larijani did not support the initiative. Rouhani's office rejected the Le Figaro account outright, describing it as a US-Israeli fabrication aimed at creating doubt and concern in Iranian public opinion.
Iranian media widely republished the New York Times and Le Figaro reports but mostly avoided detailed analysis.
Global reactions are shaping energy adjustments. 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.