Global oil disruption grows as Iran, U.S. defiant on end of war

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Oil prices surged again on Thursday after Iran’s new leader vowed that a key global shipping route in the Persian Gulf will remain closed, continuing the chokehold on roughly 20 per cent of the world’s crude supplies.

And while the International Energy Agency’s planned release of 400 million barrels of oil reserves will go some way to balancing the market, energy watchers say it will be a Band-Aid solution if the Strait of Hormuz remains shut.

The war that began Feb. 28 with air strikes on Iran has essentially closed the narrow waterway, through which roughly 20 million barrels of oil a day normally pass. And Iran will fight to keep it that way as leverage against the United States and Israel, new Supreme Leader Mojtaba Khamenei said on Thursday in the first comments attributed to him since he succeeded his slain father.

The prospect of a protracted war sent the price of Brent crude, the global benchmark, surging back above US$100 a barrel. West Texas Intermediate, the North American benchmark, hit US$96.96.

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Oil prices had fallen earlier in the week on hopes of a swift end to the conflict. U.S. President Donald Trump said on ‌Wednesday that his country “won” the war, but that the United States would stay in ​the fight to finish the ​job.

Those kinds of mixed messages from Mr. Trump are at the heart of the record volatility of oil prices, said Rory Johnston, oil-market analyst at Toronto-based Commodity Context.

Monday in particular saw a US$35 swing, “which was bananas,” Mr. Johnston said in an interview. Despite a few days of more moderate fluctuations, Thursday’s surge was likely a recognition that the war is nowhere near done, he said.

“While we’re still lower than the peak on Monday, we’re $35 a barrel higher than where we were before this thing started,” Mr. Johnston said. He expects prices to creep up roughly US$3 each day that the conflict persists.

“Every day it seems like we get more and more confirmation the White House did not plan to be in this conflict this long and get as deep down in this as they have,” he said.

Between March 1 and 11, the war removed roughly 17 million barrels of crude and refined products from the market. That represents “the largest oil supply disruption in history,” according to a new analysis by S&P Global Energy. “No other historical episode comes close”

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The IEA’s plan will help rebalance the market, but it will take months to fill the hole in global supply, the analysis said. And it’s unclear how quickly barrels will get to where it’s needed most, particularly Asia.

“There is too much oil that cannot be exported via the Strait of Hormuz and not enough in Asia where stocks are running down. The market is seriously unbalanced and that will continue until the Strait is reopened and upstream and downstream operations return to normal. It will not happen quickly,” Jim Burkhard, vice-president and global head of crude oil research at S&P Global Energy, said in a statement.

While the ability of ships to traverse the strait was the initial problem, concerns are growing around oil production itself, with up to seven million barrels of Gulf crude oil capacity shut because of the war, the analysis said.

Restarting the pumps will be “a massive technical exercise,” and it could take weeks, months or even more to fully restore output, Mr. Burkhard said.

Diesel and jet fuel markets have been particularly hard-hit as a result of the conflict.

Prices are “off the charts” and moving into territory “that even seasoned traders struggle to describe,” James Noel-Beswick, with Sparta market intelligence, said in a Thursday research note.

Asian diesel markets, which rely heavily on the Middle Eastern crude, have “surged to levels that would once have seemed inconceivable,” he said, as refiners in the region cut refining volumes and governments move to restrict product exports.

Even U.S. refiners - which largely rely on domestic and Canadian feedstocks - are unlikely to escape the global supply shock, he added.

“Unless the geopolitical crisis resolves rapidly, the conclusion for traders is increasingly clear: diesel and jet prices remain structurally bullish even at levels that already appear historically extreme.”

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The natural gas side of the market also remains stressed, with roughly 19 per cent of global LNG exports removed from the market because of the conflict.

Although European power is less dependent on gas than other regions, a Thursday analysis by Wood Mackenzie found the conflict will drive “sustained volatility in European power markets,” which will pass through to electricity prices across major markets.

While oil price forecasts for 2026 and 2027 were markedly depressed before the war, owing to a global supply glut, those prices have been turned on their head.

S&P Global Energy, for example, said Thursday it expects the price of Brent to range between US$70 and US$100 on a monthly average basis for the remainder of 2026, assuming secure tanker flows via the Hormuz resume in coming weeks. But if it remains closed for a couple of months, “crude oil prices would likely hit new record highs.”

On Tuesday, research house Rystad Energy said Brent could hit US$135 a barrel – approaching the record of US$147.50 set in 2008 – if the war drags on for four months. Under that scenario, oil could then ease back to US$85 as markets begin to normalize. If the conflict lasts for two months, with ship traffic resuming gradually by the end of March, it said, crude could sell for US$100 by April, then fall back to US$70 by year end.

Mr. Trump faced criticism from some lawmakers Thursday after saying the U.S. would make significant money from oil prices driven ​higher by the war.

With reports from Reuters