By Emmanuel Bobby
Oil prices surged sharply on Thursday after the International Energy Agency warned that the ongoing U.S.-Israel war with Iran is creating what it called the largest supply disruption in the history of the global oil market.
Iran’s new Supreme Leader also escalated tensions earlier Thursday, saying the Strait of Hormuz — one of the world’s most critical oil shipping routes — should be shut down, according to state television.
Following those comments, global energy markets reacted immediately. International Brent crude oil climbed above $100 per barrel, while U.S. crude oil prices rose past $95 per barrel.
Financial markets also fell amid fears of a prolonged energy crisis. At the opening bell, the S&P 500 dropped more than 1%, the Nasdaq fell 1.3%, and the Dow Jones Industrial Average plunged roughly 570 points.
Oil prices in the United States have now surged more than 40% since the war began, pushing gasoline prices higher as well. Since March 1, retail gas prices have risen nearly 70 cents, reaching an average of $3.59 per gallon on Thursday, according to GasBuddy.
Meanwhile, the conflict is increasingly disrupting oil infrastructure across the region. Overnight, a major oil export terminal in Oman was reportedly evacuated after tankers anchored off the coast of Iraq were attacked. Iraq subsequently suspended operations at several of its oil terminals. Officials in Saudi Arabia, Dubai and Kuwait also reported multiple missile strikes and sightings of drones near energy facilities.
The continuing attacks have raised fears that the conflict could turn into a prolonged war, leaving the Strait of Hormuz closed for an extended period and potentially triggering a global energy supply crisis.
Under normal circumstances, more than 20% of the world’s daily oil supply passes through the Strait of Hormuz. However, the International Energy Agency said shipping traffic through the narrow waterway has now dropped to “a trickle,” dramatically restricting the flow of oil to global markets.
“In the absence of a rapid resumption of shipping flows, supply losses are set to increase,” the agency said in its latest monthly oil market report.
In response to the crisis, the 32 member nations of the International Energy Agency agreed Wednesday to release 400 million barrels of oil from strategic reserves in an effort to stabilize markets. The move did little to immediately reduce prices.
The U.S. Department of Energy said it would contribute 172 million barrels to that emergency release. However, the release will not begin until next week and will take about 120 days to complete.
Analysts say the market remains highly volatile due to uncertainty over how long the disruption will last.
“Due to uncertainty around the duration of the largest oil supply shock on record and under our assumption that Strait of Hormuz flows remain low through March 20, oil prices are likely to trend higher over that period until the market gains confidence a lengthy disruption is unlikely,” Goldman Sachs analysts wrote in a note late Wednesday.
The analysts added that prices could climb even higher if shipping traffic remains severely restricted.
“We still think it’s likely that daily oil prices would exceed the 2008 peak if Strait of Hormuz flows were to remain depressed through March,” they said. Oil prices nearly reached $150 per barrel during the 2008 global energy crisis.
President Donald Trump appeared to downplay the impact of rising oil prices on American consumers. Writing on Truth Social Thursday, he said higher prices would also benefit U.S. revenue.
“When oil prices go up, we make a lot of money,” Trump wrote. “But of far greater interest and importance to me, as president, is stopping an evil empire, Iran, from having nuclear weapons and destroying the Middle East and, indeed, the world.”
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