Iran Conflict and the Strait of Hormuz: Impacts on Oil, Gas, and Other Commodities

U.S. and Israeli military operations against Iran since February 2026 and subsequent Iranian military action throughout the Persian Gulf have raised concern about oil and natural gas markets in relation to the Strait of Hormuz (the Strait). Starting on March 4, 2026, Iranian forces have declared the Strait “closed,” threatening and carrying out attacks on ships attempting to transit the Strait. In light of a considerable decrease in shipping traffic, President Donald Trump has raised the prospect of U.S. actions intended to reestablish free transit of the Strait. The Strait, which borders Iran and Oman, is a key waterway, particularly for the transit of oil and natural gas and other commodities—including helium, fertilizers, and other industrial products—to world markets. Roughly 27% of the world’s maritime trade in crude oil and petroleum products goes through the Strait. Additionally, 20% of global liquefied natural gas (LNG) trade passes through the Strait. The Strait’s role as a critical conduit for oil and natural gas resources to reach global markets establishes its importance to the global economy. Iran’s extensive Persian Gulf coast and its military capabilities have long given Iran the potential ability to project power throughout the region, including over energy trade. Iran’s threatened and actual attempts to disrupt energy commerce in the Gulf have carried strategic benefits and risks for Tehran, including by bringing Iran into direct conflict with the United States in 1987-1988. A prolonged disruption of Middle East oil trade would create oil market conditions for which there is no historical precedent. The efficacy of emergency response measures could be tested up to their design limits. Oil prices would likely experience significant upward price pressure. Exactly how high and for how long prices might be elevated is uncertain and would be determined by the amount of time needed to normalize Middle East oil trade. That said, the international benchmark, Brent, immediately jumped 8% from $71.32 per barrel on February 27, 2026, to $77.24 per barrel on March 2, 2026, the two trading days before and after the United States and Israel began military operations. As the conflict has continued, prices have gone up much higher, at one point breaking the $100 per barrel mark. In the context of the February-March 2026 conflict, daily prices of natural gas in the United States have stayed relatively flat compared with daily prices of natural gas in Asia and Europe. Prices in Asia and Europe, respectively, have gone up almost 54% and 63% over the week before operations began. U.S. prices went up 7% between February 27 and March 2, the trading days immediately before and after military operations began. Iran has been assessed to have the capacity—via the threatened or actual use of mines, speed boats, submarines, shore-based cruise missiles, aircraft, and other systems—to disrupt the flow of commercial shipping into and out of the Persian Gulf. Prior to the onset of conflict in February 2026, there appears to have been consensus among analysts that the U.S. military has the capacity to counter Iran’s forces and restore the flow of shipping, if necessary. However, such an effort would likely take some time—days, weeks, or perhaps months—depending on what forms an Iranian attempt to close the Gulf to shipping might take. War risk insurance has increased significantly since the fighting began on February 28, 2026. On March 3, 2026, President Trump stated that he had ordered the provision of political risk insurance to “ALL Maritime Trade” and said that the U.S. Navy could escort commercial vessels through the Strait “if necessary.”