Three weeks since the US-Israeli military strikes on Iran began on February 28, oil markets remain in a state of genuine structural disruption rather than the temporary price spike many analysts had initially assumed. Brent crude, which surged to within touching distance of $120 per barrel in the immediate aftermath of the conflict’s escalation, has settled back to around $103 per barrel, but that moderation conceals the severity of what is happening to actual physical oil flows through the Strait of Hormuz.
The IEA‘s March oil market report used language that rarely appears in multilateral energy agency publications. “The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” the agency stated, estimating that the closure has choked off somewhere between 15 million and 20 million barrels of crude and other oil products from global markets every day.
Those are not numbers that strategic petroleum reserve releases can address for any meaningful duration. The IEA’s own coordinated 400-million-barrel emergency release, the largest in its history and involving 32 countries, covers roughly four days of normal Hormuz flows.
Goldman Sachs’ head of oil research, Daan Struyven, broke down the underlying price mathematics early in the conflict’s development. The bank estimated fair value for Brent crude at approximately $65 per barrel absent the conflict, meaning the $103 price as of Tuesday morning embeds a sustained risk premium of roughly $38. Struyven had estimated that markets, when Brent was around $78, were pricing a roughly four-week disruption scenario. The fact that three weeks have now passed and prices remain well above that level reflects either a reassessment of the conflict’s duration or growing uncertainty about whether it resolves at anything like the pace originally assumed.
The physical supply problem is compounding in ways that were not fully appreciated in the early days of the crisis. Gulf producers, including Saudi Arabia, Iraq and the UAE, have had to cut production substantially because tankers are not moving and onshore storage is filling toward capacity. The IEA estimated that by March 10, those cuts had reached at least 10 million barrels per day of crude and other oil products. “In the absence of a rapid resumption of shipping flows, supply losses are set to increase,” the agency added. These are not demand-side reductions. They are forced supply cuts driven by infrastructure bottlenecks.
Iran’s new supreme leader Mojtaba Khamenei, son of the former leader who was killed by an Israeli strike, warned via Iranian state television that the Strait “would remain closed as a tool of pressure” and that further strikes on US military bases in the region remained possible. This posture suggests that the immediate diplomatic path to resolving the shipping crisis is considerably narrower than markets might hope. Oil prices responded by holding firmly above $100 per barrel on the day those comments were circulated.
Treasury Secretary Scott Bessent offered one concrete piece of information on Monday that helped markets understand the actual flow situation better. “The Iranian ships have been getting out already, and we’ve let that happen to supply the rest of the world,” he told CNBC. Iran exports roughly 1.5 million barrels per day, and permitting those exports to continue represents a deliberate calibration of the conflict’s economic impact, a recognition that completely choking off Iranian supply on top of Gulf disruptions would send prices to levels that would seriously damage the US and global economy.
The rerouting problem for shipping companies is creating a second-order cost effect that will feed through to corporate earnings across multiple sectors. Container shipping operators that had already rerouted around Africa to avoid the Red Sea are now adding the Hormuz disruption to their routing decisions, extending voyage times and fuel costs for every shipment between Asia and Europe. Morgan Stanley has been telling investors to increase exposure to defence, security and industrial resilience themes in 2026, noting that “prolonged conflict with Iran could lead to higher oil prices, hotter inflation and greater market uncertainty.”
The IEA estimates that at current trajectory, global oil supply will fall by 8 million barrels per day in March, with non-OPEC producers offsetting only a fraction of that through increased output. Global demand is now expected to grow by just 640,000 barrels per day year-on-year in 2026, down 210,000 barrels from prior estimates, partly because flight cancellations across the Middle East and rising fuel prices are already curbing consumption.
An extraordinary session of the International Maritime Organisation is under way in London this week, scheduled for March 18 and 19, focused specifically on threats to shipping in the Strait and the Bab el-Mandeb. The gathering will not reopen the waterway, but it reflects the scale of international concern about a disruption whose economic consequences are spreading well beyond the immediate conflict zone.