Oil above $110: How Iran war shakes global markets

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Eugene Komchuk

09.03.2026

Oil above $110: How Iran war shakes global markets — Why oil prices are rising to record levels

Oil prices have surpassed $110 per barrel amid the war with Iran and supply disruptions in the Middle East. The escalation of the conflict led to the closure of the Strait of Hormuz — a key route through which about one-fifth of global oil supplies normally pass. Against the backdrop of shipping threats, production cuts, and growing geopolitical tensions, the market is experiencing one of the biggest price surges in recent years.

How it all started

Over the weekend, global markets saw an unprecedented surge in oil prices. Brent crude, which had mostly stayed below $90 per barrel throughout the week, briefly climbed to nearly $120 by Monday. WTI showed a similar trajectory. Overall, Brent gained about 27% over the past week, while WTI jumped 35%. Although prices later pulled back to around $110, it was still the biggest weekly rise for U.S. crude since 1983.

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The main reason for the spike was supply disruptions in the Middle East caused by the war with Iran. A key factor was the Strait of Hormuz, which normally handles around 20% of global oil shipments. Traffic through the narrow waterway is now almost paralyzed. Tanker companies are reluctant to use the route due to the risk of attacks, and some shipments are simply stuck. As a result, oil has started piling up in storage facilities, while markets began pricing in the risk of a prolonged supply shortage.

The problem has also affected the region’s largest producers. In Iraq, output at the three main southern oil fields fell by 70% — from 4.3 million to 1.3 million barrels per day. Kuwait has started cutting production and declared force majeure on shipments. The UAE said it is carefully managing offshore production levels as storage facilities fill up quickly. Even Saudi Aramco, the world’s largest oil exporter, has begun offering crude from alternative locations outside the Persian Gulf — including Yanbu in the Red Sea, Ain Sokhna in Egypt, and even from a tanker near Taiwan.

What is happening in Iran and how the world is responding

Another factor for the market was the sharp escalation inside Iran itself. Following the death of Ali Khamenei, his son Mojtaba Khamenei was appointed the country’s new Supreme Leader. According to Iranian media, he secured decisive support in the Assembly of Experts, while the Islamic Revolutionary Guard Corps quickly pledged full loyalty to the new leadership. For the market, this signaled that Tehran intends to maintain a hard line, making quick steps toward de-escalation unlikely.

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At the same time, military strikes continued. Israel launched attacks on targets in Tehran and other areas, including fuel depots and facilities linked to missile infrastructure. Iran, in turn, continued launching missiles and drones toward Israel and Persian Gulf states. Infrastructure beyond Iran was also affected: Bahrain reported damage to a desalination plant, Kuwait and Saudi Arabia intercepted missiles and drones, and a fire broke out in the oil infrastructure zone of Fujairah in the UAE after falling debris.

Against this backdrop, major economies are preparing emergency measures. According to the Financial Times, G7 finance ministers gathered to discuss a possible coordinated release of oil from strategic reserves in cooperation with the International Energy Agency. These reserves are held by member countries to respond to major supply disruptions.

In the United States, pressure has also increased on the administration of President Donald Trump to tap the Strategic Petroleum Reserve. The U.S. SPR currently holds about 415 million barrels of oil. For comparison, Washington released about 180 million barrels in 2022 after Russia invaded Ukraine. However, even the potential use of emergency reserves does not eliminate the main risk — the Strait of Hormuz remains effectively closed.

Consequences for the global economy

The sharp rise in oil prices is already affecting other markets. Investors fear that expensive energy could accelerate inflation and force central banks to keep interest rates higher for longer. In Japan, for example, yields on long-term government bonds rose by around 11 basis points. Analysts at Bloomberg Economics say the oil spike could push the Bank of Japan to raise rates earlier — possibly in the spring rather than the summer as previously expected.

High energy prices are also creating problems for countries heavily dependent on fuel imports. According to Fitch Ratings, in some Asian economies spending on oil and gas imports exceeds 3% of GDP. These include India, Pakistan, the Philippines, and Thailand. If oil prices remain high for an extended period, it could put additional pressure on their budgets and currencies while widening current-account deficits.

Another sign of stress in the market is record trading activity. Around 900,000 Brent contracts were traded in a single day, while the total volume reached roughly 18.6 million contracts over the past week.

What awaits the oil market

The surge in oil prices is directly linked to the military conflict and risks to key supply routes. As long as the Strait of Hormuz remains largely closed and strikes continue, markets will keep pricing in the possibility of supply shortages. That is why even news about a potential release of strategic reserves has not significantly cooled prices.

The next move in oil prices will largely depend on the situation around the strait and the scale of the conflict. If shipping resumes and supplies stabilize, the market could cool quickly. But if disruptions persist or the war spreads to more energy infrastructure in the region, oil prices may remain above $110 per barrel for an extended period.

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