Oil Tops $119 a Barrel and Markets Reel as US-Israel War on Iran Triggers Worst Energy Crisis Since Ukraine Invasion

Global energy markets are in turmoil. Oil prices have surged to their highest levels since Russia’s 2022 invasion of Ukraine, stock markets from Tokyo to London are sliding, and economists are warning of a potentially historic disruption to the world’s energy supply — all stemming from the US-Israel war on Iran that began on February 28, 2026.

The conflict has done what analysts and strategists feared most: triggered the effective closure of the Strait of Hormuz, the narrow waterway through which approximately one-fifth of the world’s oil and liquefied natural gas (LNG) passes every day.

Build the future you deserve. Get started with our top-tier Online courses: ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Let Serrari Ed guide your path to success. Enroll today.

How Oil Prices Reached a Four-Year High

In the days following the first US and Israeli strikes on Iran, crude oil prices climbed steadily. But it was the weekend of March 8–9 that shocked global markets into full crisis mode, after Israel carried out air raids targeting Iran’s oil infrastructure for the first time since the war began.

Brent crude, the international benchmark, briefly surged to $119.50 a barrel on Monday morning — its highest level since 2022 — having jumped roughly 25% since Friday alone. The price represented a cumulative increase of approximately 50 percent since the war’s start, marking the most dramatic oil price shock the world has seen in years.

The strikes on March 8 hit four oil storage facilities and an oil products transfer centre in Tehran and the province of Alborz, according to Iranian state media. A fire broke out at the Shahran oil depot, with images showing thick plumes of smoke rising over the Iranian capital.

Neil Atkinson, former head of oil at the International Energy Agency, said the effective closure of the Strait of Hormuz was something energy markets had never faced before. Unless something changes very soon, he told CNBC, “we are in a potentially game-changing and unprecedented energy crisis.”

Prices retreated somewhat from their peak after the Financial Times reported that G7 finance ministers would hold an emergency meeting to discuss a coordinated release of petroleum reserves through the International Energy Agency, providing some temporary reassurance to markets. By Monday’s close, oil had settled at around $103 per barrel — still deeply elevated by historical standards, but down from the $119 intraday peak.

The Strait of Hormuz: The World’s Most Critical Chokepoint

At the heart of the crisis is a stretch of water 33 kilometres wide at its narrowest point: the Strait of Hormuz, flanked by Iran on one side and Oman and the UAE on the other.

According to the US Energy Information Administration, approximately 20 million barrels of oil transited the strait every day in 2024 — representing about $500 billion in annual global energy trade. That flow has now all but stopped.

Iran’s Islamic Revolutionary Guard Corps (IRGC) declared the strait “closed” shortly after the war began, warning that any vessel attempting to pass would be set “ablaze.” A US-flagged product tanker, the Stena Imperative, was damaged by aerial impacts while berthed in the region, killing a shipyard worker. The IRGC also claimed it hit the Honduran-flagged Nova with two drones, leaving it burning in the waterway.

Shipping through the Strait dropped 95% in the first week of March, according to S&P Global Market Intelligence. The last non-Iranian commercial ship to pass through the Hormuz was a Chinese-owned bulk carrier on Saturday, March 7, according to Bloomberg.

The implications extend far beyond oil. The strait also carries about 20 percent of the world’s LNG, with 83 percent of those volumes destined for Asian markets. China, India, Japan and South Korea — which together accounted for 69 percent of all crude oil flows through the strait in 2024 — are now facing acute energy supply disruptions.

South Korea, which imports 20 percent of its gas from the region, said it could run out of LNG in nine days. South Korean President Lee Jae Myung announced a 100 trillion won ($68.3 billion) stabilisation fund to cope with soaring energy prices.

“The Strait of Hormuz has to be reopened,” said economist Simon Johnson of the Massachusetts Institute of Technology and recipient of the 2024 Nobel prize in economics. “It’s 20 million barrels of oil a day going through there. There’s no excess capacity anywhere in the world that can fill that gap.”

IRGC Threatens $200 Oil and Regional Shutdown

Iran has not limited its threats to the Hormuz closure. Ebrahim Jabari, a senior adviser to the IRGC commander-in-chief, posted on the Corps’ Telegram channel that “oil price will reach $200 in the coming days” if US and Israeli attacks continue, and that Iran would “not allow a single drop of oil to leave the region.”

A spokesman for Iran’s Revolutionary Guard, General Ali-Mohammed Naeini, stated through the semiofficial news agency Tasnim that the armed forces of the Islamic Republic would not allow “the export of even one liter of oil from the region to the hostile side” until attacks cease.

Meanwhile, attacks on energy infrastructure across the Gulf have compounded the supply squeeze. Iran has been blamed for strikes on energy facilities in Qatar, Saudi Arabia, and Kuwait. Qatar’s state-run energy firm QatarEnergy halted LNG production following Iranian attacks — a seismic event for global gas markets, given Qatar is the world’s third-largest LNG exporter.

Qatar’s Energy Minister Saad al-Kaabi warned in an interview with the Financial Times that all Gulf producers could be forced to halt exports within days. “Everybody that has not called for force majeure we expect will do so in the next few days that this continues,” he said. Bahrain’s state oil company has already declared force majeure, releasing it from contractual obligations due to extraordinary circumstances.

Iraq, Kuwait and the UAE Cut Production

With the Strait of Hormuz effectively blocked, Iraq and Kuwait have already begun shutting in production as their storage facilities fill up. The UAE is expected to follow, with Saudi Arabia potentially next if the closure extends beyond two to three weeks, according to analysts.

“At some point soon, everyone will also shut in if vessels do not come,” a source with a state oil company in the region told Reuters.

Amir Zaman, head of the Americas commercial team at Rystad Energy, warned that restarting oilfields is not a simple matter. “The conflict could be ended, but it could take days or weeks or months, depending on the types of fields, age of the field, the type of shut-in that they’ve had to do before you can get production back up to what it once was,” he said.

Saudi Arabia has diverted oil shipments to the Red Sea at record levels, though that route also faces potential disruption from Iran-aligned Houthi forces in Yemen, who have targeted vessels in the area since 2023.

One decision can change your entire career. Take that step with our Online courses in ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Join Serrari Ed and start building your brighter future today.

Global Markets React: Stocks Plunge, Stagflation Fears Mount

Global equity markets have taken a severe beating as the oil shock ripples through financial systems.

Japan’s Nikkei 225 closed more than 5 percent lower on Monday, after falling as much as 7 percent in early trading. South Korea’s KOSPI fell 6 percent after plunging 8 percent. European markets also opened sharply lower, with the FTSE 100 in London down about 2 percent and Frankfurt’s DAX falling roughly 3 percent.

In the UK, government bonds have been caught in the crossfire. The yield on the 10-year UK gilt surged to its highest since October, while two-year UK bond yields were on track for their worst day since Liz Truss’s ill-fated mini-budget of 2022, as markets priced in the prospect of higher-for-longer interest rates.

US stock futures signalled further pain ahead of Wall Street’s open, with S&P 500 futures falling 1.7 percent and Nasdaq futures dropping 1.9 percent. Meanwhile, the US dollar index rose to a three-month high, as traders revised up inflation expectations and pushed back bets on Federal Reserve rate cuts.

For economists, the most alarming spectre is stagflation — the toxic combination of high inflation and stagnant growth that defined the 1970s energy crises. The Federal Reserve and European Central Bank had been planning interest rate cuts in 2026, predicated on inflation continuing toward the 2 percent target. A sustained oil price shock fundamentally changes that calculation.

“Central bankers are haunted by the memory that their predecessors didn’t get it right in the 1970s,” economist Simon Johnson told PBS NewsHour. “They thought it was a temporary shock. They thought they could accommodate with lower interest rates, and they ended up regretting that because inflation became much higher.”

The IMF’s managing director Kristalina Georgieva warned that the crisis could risk pushing up global inflation substantially. Every sustained 10 percent rise in oil prices, she said, would push up global inflation by 0.4 percentage points and reduce worldwide economic output by as much as 0.2 percent.

With oil prices up roughly 50 percent since the war began, the arithmetic is stark: if prices remain elevated, the inflationary and recessionary headwinds could be severe.

G7 Discusses Emergency Petroleum Reserves — But No Deal Yet

In an effort to calm markets, G7 finance ministers held an emergency virtual meeting on March 9, bringing together the heads of the IMF, World Bank, OECD and IEA to discuss the coordinated release of strategic petroleum reserves.

Japan’s finance minister Satsuki Katayama confirmed that the IEA explicitly requested the coordinated release during the call. The IEA noted it holds access to more than 1.2 billion barrels of emergency oil across member nations — reserves built precisely for moments like this.

However, no agreement was reached. France’s Finance Minister Roland Lescure told reporters the G7 was “not there yet” on a deal, though the group stood “ready to take necessary and coordinated steps” to stabilise markets. The G7 joint statement said ministers would continue to “closely monitor the situation and developments in the energy markets.”

Energy expert Brenda Shaffer, a professor at the Naval Postgraduate School, suggested that the mere discussion of reserve releases could have a smoothing effect. “As long as the market keeps hearing about these possibilities,” she told the AP, “I think that will have a smoothing effect on the global oil market.”

Trump Dismisses Concerns — and Considers Taking Over the Strait

US President Donald Trump has so far dismissed worries about surging energy prices as temporary. “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace,” he posted on Truth Social on Sunday, adding that “ONLY FOOLS WOULD THINK DIFFERENTLY.”

US Secretary of Energy Chris Wright also downplayed the prospect of higher energy prices, telling CBS News’s Face the Nation programme that any increase in prices at the petrol pump would be “temporary.”

In a more striking development, Trump told CBS News on Monday that he was “thinking about taking over” the Strait of Hormuz to ensure it remains open — a statement that legal experts quickly noted would be deeply problematic under international law.

Alexander Freeman, a partner in the shipping team at UK-based law firm Hill Dickinson, warned that “the United States has no jurisdiction over the Strait of Hormuz, which are not international waters under UNCLOS.” Taking over the strait without the consent of Iran and Oman “would likely amount to an incursion on Iran and Oman’s jurisdiction,” he said.

Trump also threatened that Iran would be hit “TWENTY TIMES HARDER” if it continued to block oil shipments, warning at a press conference in Florida: “I will not allow a terrorist regime to hold the world hostage and attempt to stop the globe’s oil supply.”

Iran’s top security official Ali Larijani shot back, reposting Trump’s message on X and writing in Farsi: “The Iranian people do not fear your hollow threats,” noting that more powerful forces than the White House had failed “to wipe them out.”

UK, Europe React: Rising Mortgage Rates and Energy Coordination

The economic fallout has reached consumers far beyond the Gulf. In the UK, the RAC reported that petrol prices rose by 5p to 137.5p a litre since the war began on February 28, while diesel surged 9p to 151p per litre.

High street lenders including Barclays began raising mortgage rates as swap rates climbed and traders increasingly bet on a Bank of England base rate rise in 2026 rather than the cuts that had been anticipated. UK Chancellor Rachel Reeves was described as speaking with the Bank of England “on a daily basis” by Prime Minister Keir Starmer.

The European Union’s oil and gas supply coordination groups convened Thursday to assess the energy impact of the conflict. EU countries are legally required to hold oil stocks covering 90 days’ worth of consumption — a buffer that now looks increasingly important given the region’s shift toward Gulf imports after cutting ties with Russian energy following the Ukraine invasion.

Britain separately announced it was working with allies on options to support commercial shipping through the Strait of Hormuz. After meetings with the leaders of Germany and Italy, Downing Street said the three governments agreed on the “vital importance of freedom of navigation” through the strait.

Ripple Effects: Fertiliser, Food and Fragile Economies

The disruptions extend beyond crude oil and LNG. According to Al Jazeera, about one-third of global fertiliser trade passes through the Strait of Hormuz — a fact of acute concern as the Northern Hemisphere heads into spring planting season.

Egypt’s President Abdel Fattah el-Sisi warned last week that his country’s economy was in a “state of near-emergency” due to growing inflation. Pakistan, already under severe economic strain, faces a dangerous deterioration of its balance of payments as energy import costs surge.

The war, in the words of Bloomberg Economics, threatens to deal “a severe blow to a global economy” still grappling with the impact of historic US tariff hikes imposed in 2025. For Europe, sustained higher energy prices could push economies to the brink of recession. For the US, the Federal Reserve faces an impossible bind — caught between a war-driven inflation surge and a president demanding lower interest rates.

What Comes Next

The trajectory of oil prices hinges largely on how long the Strait of Hormuz remains effectively closed.

Muyu Xu, senior crude oil analyst at global trade analytics firm Kpler, told TIME that further escalation — particularly attacks on major oilfields — could push prices beyond historical highs, while swift de-escalation and a rapid reopening of the strait could bring them down quickly.

Ali Vaez, director of the Iran project at the International Crisis Group, offered a sobering assessment. “Closure of the Strait of Hormuz would disrupt roughly a fifth of globally traded oil overnight — and prices wouldn’t just spike, they would gap violently upward on fear alone,” he told Al Jazeera. “The shock would reverberate far beyond energy markets, tightening financial conditions, fuelling inflation, and pushing fragile economies closer to recession in a matter of weeks.”

Mike O’Rourke, chief market strategist at JonesTrading, was blunt: “If oil remains at these levels for several weeks, it will be a major global headwind. Thus far, markets have underestimated the risks related to the conflict in Iran.”

The war is now in its eleventh day. Attacks and counter-attacks continue. And the world waits to see whether the most critical maritime chokepoint in the global energy system will reopen — or tighten further.

Ready to take your career to the next level? Join our Online courses: ACCA, HESI A2, ATI TEAS 7 , HESI EXIT  , NCLEX – RN and NCLEX – PN, Financial Literacy!🌟 Dive into a world of opportunities and empower yourself for success. Explore more at Serrari Ed and start your exciting journey today! ✨

Track GDP, Inflation and Central Bank rates for top African markets with Serrari’s comparator tool.

See today’s Treasury bonds and Money market funds movement across financial service providers in Kenya, using Serrari’s comparator tools.

Photo Source: Google

By: Montel Kamau

Serrari Financial Analyst

11th March, 2026