The Iran war has triggered the largest supply disruption in the history of the global oil market, with the International Energy Agency reporting a loss of 20 million barrels per day, according to multiple reports. The Strait of Hormuz, which normally handles about 20% of the world's oil and gas, has been effectively closed, according to multiple media reports. Oil prices soared about 6% to their highest since 2024 on Tuesday, rising for a third session as the war widened. Brent crude rose $4.70, or 6.1%, to $82.44 a barrel, while US West Texas Intermediate rose $4.43, or 6.2%, to $75.66, according to research sources. Major media reports indicate that Brent crude oil prices rose to over $100 per barrel after the war began, creating confusion about the current price level.
The war has triggered a cascade of energy price increases across fuels. US diesel futures jumped around 12% to their highest since September 2023, and US gasoline futures climbed about 4% to $2.47 a gallon, according to research sources. The disruption has also affected other fuels, with British wholesale gas prices climbing to 171p a therm, the highest since 2022, as reported by multiple media outlets. The current crisis is estimated to have an impact 17 times larger than the halt of Russian gas to Europe in 2022, according to multiple reports.
I would shut down my UK facility if high prices persist for three months.
Governments have responded with emergency measures. The IEA released 400 million barrels from emergency oil reserves, as reported by major media. President Trump lifted sanctions on Russian and Iranian crude and temporarily waived the Jones Act, according to multiple reports. India and Indonesia said they were seeking alternative energy supplies due to the Strait of Hormuz situation, according to research sources. In China, supply disruptions were causing some refineries to shut or push ahead maintenance plans, according to research sources. Saudi Aramco is attempting to reroute some crude exports to the Red Sea to bypass the Strait of Hormuz, according to research sources.
The war has devastated energy infrastructure across the region. Iran struck Qatar's Ras Laffan natural gas terminal, wiping out 17% of Qatar's LNG export capacity, according to QatarEnergy. Repairs to the terminal will take up to five years, QatarEnergy said. Saudi Arabia shut its biggest refinery, and Iraq has cut production by nearly 1.5 million barrels a day, with cuts that could more than double within days due to storage constraints, according to research sources. Qatar has stopped LNG production, Israel has stopped production at some gas fields, and output in Iraq has dropped, according to research sources. US-operated energy assets in Iraq are at risk because they rely heavily on transit through the Strait of Hormuz, according to Standard Chartered analysts.
Iran’s retaliation has been broader than previous symbolic measures and poses real risk to supply.
European and British industries face soaring energy costs and survival mode. According to The Guardian - UK News, Peter Huntsman described that he would shut down his UK facility if high prices persist for three months. Somers Forge's monthly gas bill soared from £150,000 to as high as £250,000, according to Tammy Inglis, Somers finance director. The UK imports about 70% of its gas, according to major media reports. 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 war has caused energy traders to lose millions due to market volatility, according to a trading analyst at a major European energy company.
The war has caused environmental damage from burning oil fields and attacks on infrastructure, according to major media reports. Black rain fell near Tehran due to air pollution from oil infrastructure fires, according to multiple reports.
Iran’s attacks on infrastructure could boost oil prices by $10 with Brent going to $90 and up.
Fertilizer shortages and price hikes threaten global food production. The war has led to fertilizer shortages and price hikes, with urea prices up 50% and ammonia up 20%, according to major media reports. Up to 40% of world exports of nitrogen fertilizer pass through the Strait of Hormuz, according to multiple reports.
Petrochemical supply disruptions are raising costs for consumer goods. The war has caused a 10-15% cost increase for synthetic fibers used in stuffed toys, according to Ricardo Venegas, CEO of Aleni Brands. Petrochemicals are used in over 6,000 consumer products, according to the US Department of Energy.
U.S. and Israeli air attacks were projected to last four to five weeks but could go on longer, and that the U.S. was considering oil tanker insurance support.
The war has accelerated nuclear power plans in Asia and Africa, according to major media reports. South Korea is increasing nuclear power generation and speeding up maintenance at five offline reactors, according to multiple reports. Taiwan is considering restarting two mothballed reactors, according to multiple reports. Japan's Prime Minister signed a $40 billion reactor deal with the US and a nuclear fuel recycling agreement with France, according to multiple reports.
Internal Iranian political dynamics are in flux. The New York Times cited Iranian officials as saying Tehran has prepared contingency plans in case of war with the US or Israel, including scenarios where senior leaders could be killed. The planning is designed to ensure continuity of the Islamic Republic under extreme circumstances, with senior figures including Larijani, Ghalibaf, and Rouhani named as part of the contingency structure, according to the New York Times report. Larijani's expanding role has reduced the visible influence of President Masoud Pezeshkian in day-to-day governance, according to the New York Times. 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 Le Figaro, Rouhani gathered political figures including Zarif, clerics from Qom, and individuals linked to the Revolutionary Guards to discuss an alternative leadership arrangement. Le Figaro said the effort failed partly because Larijani did not support the initiative. Rouhani's office rejected the Le Figaro account, describing it as a US-Israeli fabrication. 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, according to research sources. Iranian media widely republished the New York Times and Le Figaro reports but mostly avoided detailed analysis, according to research sources.
The war has widened to include attacks on Lebanon and Gulf energy infrastructure. Israel has attacked Lebanon, and Iran has responded with strikes against energy infrastructure in Gulf countries and tankers in the Strait of Hormuz, according to research sources. Tankers and container ships are avoiding the Strait of Hormuz after insurers cancelled coverage; Iranian media reported Iran will fire on any ship trying to pass, according to research sources. According to virginiabusiness.com, Standard Chartered analysts described that Iran's retaliation has been broader than previous symbolic measures and poses real risk to supply. According to virginiabusiness.com, Andrew Lipow described that Iran's attacks on infrastructure could boost oil prices by $10 with Brent going to $90 and up. According to virginiabusiness.com, President Donald Trump described that US and Israeli air attacks were projected to last four to five weeks but could go on longer, and that the US was considering oil tanker insurance support.
The crisis is estimated to have an impact 17 times larger than the 2022 Russian gas halt, with tankers rerouting globally and energy traders losing millions. Tankers loaded with crude have U-turned in the Atlantic and LNG tankers have changed destination from Europe to Asia, according to multiple reports.
Unknowns remain: the current Brent crude price compared to pre-war levels, the exact status of the Strait of Hormuz, the war's duration, and the full extent of Iran's internal instability.