The conflict has sent oil and gas prices soaring due to the shutdown of the Strait of Hormuz, with Brent crude registering its steepest one-month gains and dramatic daily price fluctuations since the war began. On Tuesday, oil prices soared about 6% to their highest since 2024, 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, while U.S. WTI 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, with Brent crude oil climbing to $105.32 per barrel, up from roughly $70 before the war.
The Strait of Hormuz closure caused the loss of 20 million barrels of oil a day, the largest supply disruption in global oil market history. Roughly 15 million barrels of crude oil and 5 million barrels of oil products passed daily through the strait before the war, about 20% of global oil consumption. Tankers and container ships are avoiding the strait after insurers cancelled coverage for vessels and global oil and gas shipping rates soared, with concerns increasing after Iranian media reported that Iran will fire on any ship trying to pass through. 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, sources said.
Specific energy infrastructure across the Middle East has been damaged or shut down as a precaution. Since the start of attacks, oil and gas infrastructure in several countries has shut because of damage or as a precaution, with Qatar stopping liquefied natural gas production, Israel halting production at some gas fields, Saudi Arabia shutting its biggest refinery, and output in Iraq dropping. Iran hit Qatar's Ras Laffan LNG terminal, wiping out 17% of Qatar's LNG export capacity, with repairs taking up to five years. The war has widened, with Iraq, the No. 2 crude producer in OPEC behind Saudi Arabia, cutting production by nearly 1.5 million barrels a day, and the cuts could more than double within days as the country runs out of storage space for crude it cannot export due to the crisis. Standard Chartered analysts added that U.S.-operated energy assets in Iraq are at risk because they rely heavily on transit through the Strait of Hormuz.
Asia was hit first and hardest by disruptions to Middle Eastern oil and gas shipments, forcing countries to seek alternatives. Citing the Strait of Hormuz, India and Indonesia said they were seeking alternative energy supplies, with Asian countries turning to coal as the Iran war disrupts oil and gas shipments. India is burning more coal to meet summer demand, and South Korea has lifted caps on coal electricity, while China has built record coal power capacity since 2021 to improve energy security. Indonesia, the world's largest exporter of thermal coal, is prioritizing domestic use over exports. In China, supply disruptions were causing some refineries to shut or push ahead maintenance plans, and tankers of crude and LNG have been diverted from Europe to Asia due to the crisis.
The global energy shock is leading some nations in Africa and Asia to boost nuclear power generation for greater security. Nuclear power provides about 10% of global electricity, with 31 countries using it and 40 considering or preparing to build plants. South Korea is increasing nuclear power generation and speeding up maintenance at offline reactors, while Taiwan is considering restarting mothballed nuclear reactors due to the crisis. Japan has signed a $40 billion reactor deal with the U.S. and other nuclear agreements since the war began.
Europe is experiencing deep energy-linked frustration again due to the Middle East conflict, threatening to dominate a European leaders summit. The Iran war is causing knock-on effects in the Middle East that are awakening past crises in the European Union. The EU has reduced Russian oil imports to 2%, flowing only to Hungary and Slovakia, and plans to end all Russian gas imports by next year, but before Russia's invasion of Ukraine, Russia supplied an estimated 55% of German natural gas imports.
The UK's vulnerability to price swings is exacerbating industrial strain, particularly in the chemicals sector. 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, and the UK imports about 70% of its gas. The chemicals sector in Britain has seen production output fall by 60% since 2021, with at least 25 sites closing. The Iran war has exposed global vulnerability to petrochemicals, which underpin many products from food to plastics, and petrochemicals account for 15%-16% of oil demand and are among the fastest-growing uses.
Environmental and health risks are mounting from war-related pollution. The war has unleashed pollutants that threaten agriculture, drinking water, and health, with over 400 environmentally concerning incidents recorded. Black rain fell near Tehran due to oil infrastructure fires, posing health risks from soot and toxic chemicals.
Globally, the economic strain is severe, driving up prices and forcing government interventions. The war has driven up prices, darkened the global economic outlook, and forced developing countries to ration fuel and subsidize energy. Urea prices are up 50% and ammonia 20% due to the Strait of Hormuz blockage, affecting fertilizer supplies, and the International Energy Agency released 400 million barrels of emergency oil reserves, the largest in its history. U.S. gasoline futures climbed about 4% to $2.47 a gallon, their highest since July 2024.
Geopolitically, tensions between Iran and the United States remain high, with military options on the table. Heightened tensions exist between Iran and the United States, with indirect talks continuing while President Donald Trump has warned that military strikes remain an option if diplomacy fails and Washington has expanded its military presence in the region.
Iran has prepared contingency plans for leadership continuity in case of war with the U.S. or Israel. 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 in which senior leaders—even Supreme Leader Ali Khamenei—could be killed. According to the report, the contingency planning is designed to ensure continuity of the Islamic Republic under extreme circumstances, with several senior figures named as part of that contingency structure, including security chief Larijani, parliament speaker Mohammad Bagher Ghalibaf and former president Hassan Rouhani.
Controversial reports suggest internal power dynamics in Iran are shifting. The New York Times report suggested that Larijani’s expanding role has reduced the visible influence of President Masoud Pezeshkian in day-to-day governance. Le Figaro published a controversial account alleging that during the height of 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, and 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.” 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, and the news outlet Eghtesad24 suggested the New York Times report portrays Larijani as a “crisis manager” operating across multiple arenas—from nuclear diplomacy to regional strategy and wartime planning.
The conflict's ripple effects extend to the war in Ukraine, with potential consequences for Russia's finances. The Swedish Armed Forces Chief warns that a U.S. war in Iran could have consequences for Ukraine. Rising oil prices could lead to Russia's war chest being replenished.
Amid the volatility, some energy traders have reaped significant windfalls. Vitol paid its traders an average of over $785,000 each in 2022, with shareholder payouts of $2.5bn in 2022 and another $2.5bn in the first half of 2023.