Oil Surges Over 14% on Iran War Fears
U.S. crude oil prices have jumped more than 14% since the war with Iran began, sparking fears of a major supply disruption through the Strait of Hormuz. Global equity markets initially plunged but have since partially recovered, a strange reaction that has confounded some analysts given the spiraling conflict.
The conflict, now in its fourth day, involves joint U.S. and Israeli military strikes against Iran, which has launched retaliatory counter-strikes across the region. The Trump administration's stated objectives include destroying Iran's ballistic missile and naval capabilities and preventing the country from developing nuclear weapons. Fears of supply disruption center on the Strait of Hormuz, a narrow waterway between Oman and Iran. This chokepoint handles nearly 27% of all maritime oil trade, with an average of 20.1 million barrels passing through it daily in the first quarter of 2025. A prolonged closure could push oil prices past $100 a barrel. On February 28, 2026, Iran's Revolutionary Guards began warning that ship passages through the strait were "not allowed." In response, German shipping group Hapag-Lloyd announced it had suspended all vessel transit through the strait until further notice. Historically, Middle East conflicts have triggered major oil shocks. The 1973 Arab-Israeli War caused oil prices to nearly quadruple, while the 1979 Iranian Revolution saw prices more than double within a year. These events led to global inflation and economic strain. The United Nations' nuclear watchdog has confirmed that satellite imagery shows damage to entrance buildings at Iran's underground Natanz Fuel Enrichment Plant. Meanwhile, neighboring countries have faced significant bombardment, with Qatar reporting it has intercepted 90 ballistic missiles and Kuwait detecting 178 since the war began. The stock market's ability to partially recover is not unprecedented. Analysis of geopolitical shocks since WWII shows that while markets often see a short-term dip, they tend to recover within a couple of months. Investors often weigh long-term economic fundamentals more heavily than immediate geopolitical headlines.
