On Friday, international benchmark Brent crude futures closed at $112.19 per barrel — a 3.26% single-day gain — after Iraq declared a force majeure at all foreign-operated oilfields, citing its inability to ship crude through the Strait of Hormuz amid Iranian attacks on tanker traffic. Drone strikes on two Kuwaiti refineries intensified the panic, sending bullish bets on ICE Brent to their highest levels in over six years.
The conflict began on February 28 when the United States and Israel launched joint strikes on Iran. Since then, Brent has surged nearly 80% from under $73 a barrel. Dubai crude — the benchmark for Asian buyers — has already hit an all-time high above $150, creating an unprecedented $50-plus spread with WTI.
THE CHOKEPOINT
The Strait of Hormuz — a narrow waterway between Iran and Oman — carries roughly 20% of the world's oil supply daily. Since the war began, Iranian threats have reduced tanker traffic to near zero. Saudi Arabia, the UAE, Kuwait, and Iraq have collectively cut oil production by at least 10 million barrels per day — the largest supply disruption in the history of the global oil market.
The IEA responded with an unprecedented 400-million-barrel emergency reserve release. The US committed to releasing 172 million barrels from its Strategic Petroleum Reserve over 120 days. So far, neither measure has contained prices.
INFRASTRUCTURE UNDER FIRE
On March 18, Israel struck Iran's South Pars gas field — the world's largest natural gas reserve. Iran's retaliation hit Saudi Aramco's Samref refinery, the Jubail petrochemical complex, and Qatar's Ras Laffan Industrial City. QatarEnergy confirmed the attacks wiped out 17% of Qatar's LNG export capacity, with repairs expected to take up to five years. European natural gas prices surged 24% following the strikes.
PRICE SCENARIOS
Citi expects Brent to climb to $120 per barrel over the next one to three months, with a bull-case of $150 if disruptions intensify. Wood Mackenzie analysts say $200 is "not outside the realms of possibility." Saudi oil officials privately expect prices could exceed $180 if disruptions persist through late April.
The IMF calculates that every 10% sustained rise in oil prices adds 0.4% to global inflation and cuts economic growth by 0.15%. At $150 or above, the world faces a debilitating inflationary shock.
Goldman Sachs offers a more measured base case: a gradual recovery of Hormuz flows from April, easing Brent back to the $70s by Q4 2026.
INDIA'S EXPOSURE
India finds itself in a delicate position as one of the world's largest oil importers. India's External Affairs Ministry confirmed it is in ongoing discussions with Iran to secure passage for 22 ships through the strait; two have already reached Indian shores. India has simultaneously accelerated purchases from Russian crude to offset Gulf supply losses.
Indian equity markets have felt the blow. The Nifty 50 fell over 5.8% this week, extending year-to-date losses past 12% — making India the weakest major emerging market. Rising crude costs feed directly into India's import bill, current account deficit, and retail fuel prices, adding pressure on the RBI's inflation management calculus.
THE OUTLOOK
Markets received a moment of relief late Friday after Israeli Prime Minister Netanyahu announced Israel was assisting US efforts to reopen the Strait of Hormuz. Brent briefly pulled back to near $108 in post-settlement trading.
But the structural damage is already done. Qatar's LNG capacity may take five years to rebuild. The Brent-WTI spread has blown out to $13-plus. Physical crude in Asia trades at a $40 premium over futures — a sign that actual barrels, not paper contracts, are the scarce resource now.
The adage "the cure for high prices is high prices" may eventually apply — US, Canadian, and Brazilian producers stand to accelerate output at these levels. But ramping supply takes months, not days. The playbook written over four decades of Middle East oil diplomacy has been torn up in three weeks of war.