Oil prices soar on Middle East conflict as strikes on Iran disrupt crude flows through Hormuz Strait

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SINGAPORE – Oil prices surged on March 2 as the US-Israeli war against Iran plunged the global crude market into turmoil, with the effective closure of the Strait of Hormuz.

In early trade in Asia, global oil benchmark Brent crude hit US$82.37 per barrel, up US$9.50, or 13 per cent, from the closing price of US$72.87 on Feb 28. Brent was trading at US$79.34, up US$6.47, or 8.88 per cent, at 7:05am Singapore time.

The US oil benchmark, US West Texas Intermediate crude, jumped US$5.36, or 8 per cent, to US$72.38 a barrel after touching a high of US$75.33 earlier.

Iran is one of the world’s top oil suppliers and tanker traffic through the Strait of Hormuz – the chokepoint off Iran’s coast that handles a fifth of the world’s oil and large volumes of gas – has largely halted following US and Israeli air strikes that killed its Supreme Leader Ali Khamenei.

While the Iranian authorities said on March 1 that the key waterway remained open, they also said they had attacked three oil tankers. Shipowners and traders responded with a self-imposed pause in place as the conflict spread.

Some analysts are predicting Brent could touch US$100, with the Middle East plunging into a new war.

In reaction to the widening conflict, OPEC+ agreed at a pre-arranged weekend meeting to increase supply quotas in March by 206,000 barrels a day. The Organisation of Petroleum Exporting Countries – which includes Iran as well as Saudi Arabia and Russia – had been expected to resume modest hikes before the outbreak of hostilities.

The conflict marks a dangerous new phase for the global oil market. The US and Israel have fired missiles at targets across Iran, while urging local people to overthrow the Islamic regime. Tehran responded with a wave of strikes against Israel, as well as US bases and other targets in states, including Saudi Arabia, Qatar, the United Arab Emirates, Kuwait and Bahrain.

“We see Brent oil trading in the US$80 to US$90 a barrel range in our base case over at least the coming week,” Citigroup analysts said in a note before the start of trading on March 2. 

“Our baseline view is that the Iranian leadership changes, or that the regime changes sufficiently as to stop the war within one to two weeks; or the US decides to de-escalate, having seen a change in leadership and set back Iran’s missiles and nuclear programme over the same timeframe,” they added.

Crude has powered higher in 2026, posting back-to-back monthly rises on sustained geopolitical tensions and a series of localised supply snarls. The gains have come despite expectations that the global oil market faces a hefty surplus, following supply increases by OPEC+, as well as nations outside the group.

The jump in energy costs – if sustained – risks boosting inflationary pressures around the world. This stands to complicate the task facing central bankers, including the US Federal Reserve, as they seek to manage the pace of price gains while also supporting growth and employment.

Iran pumps about 3.3 million barrels a day, or 3 per cent of global output, but the nation wields greater influence over energy supplies given its strategic location alongside the Strait of Hormuz. Oil from the Persian Gulf must pass through the waterway to get to major markets such as China, India and Japan.

Tanker traffic “appears significantly disrupted as many shippers, oil producers and insurers have shifted to a cautious wait-and-see mode”, Goldman Sachs analysts said in a note. “To our knowledge, there is no confirmed damage to oil production or to oil export infrastructure.” BLOOMBERG, REUTERS