Key Points
- Closure of key shipping routes and production cuts from Gulf producers tightened global supply
- Major markets, from Asia to the US and Europe, reacted with volatility and inflationary pressures
- Calls grow internationally for coordinated reserve releases to stabilise markets
ISLAMABAD: Oil markets experienced one of the sharpest price rallies in recent years as the intensifying Iran war disrupted crude oil production and shipping in the Middle East, pushing benchmark prices near $120 per barrel.
The surge reflects rising fears of sustained supply shortages and broader economic consequences.
Brent crude, the internationally recognised benchmark, briefly climbed to around $119.50 a barrel before settling lower.
On Thursday, February 27, 2026, the day before the United States and Israel launched coordinated strikes against Iran, Brent crude was trading around $72.48 per barrel.
Since then, as the Iran war has tightened supplies and raised fears of prolonged shipping disruptions through the Strait of Hormuz, crude oil prices have surged toward $120 a barrel — an increase of more than 65 per cent compared with that February 27 level.
West Texas Intermediate (WTI) spiked similarly, highlighting the scale of market unease. Both contracts touched multiyear highs not seen since the energy shocks of 2022.
The rises are largely attributed to disruptions in production and exports from key Middle Eastern producers and the de facto closure of the Strait of Hormuz, a narrow maritime corridor that normally handles about one-fifth of the world’s crude supply.
Military activity, halted tanker traffic and precautionary production cuts in countries such as Iraq, Kuwait and the United Arab Emirates have tightened the flow of oil into global markets.
In many cases, storage facilities in the Gulf have neared capacity as tankers have been unable to load and export crude, prompting producers to curtail output.
Analysts warn that if exports through key corridors remain blocked, these cuts could persist, maintaining upward pressure on prices.
The price surge has rattled financial markets worldwide.
Asian equities slumped, reflecting investor concern over inflationary pressures, while energy costs rose sharply for consumers and industries alike.
Higher crude prices filter down through transport fuel costs, electricity generation and overall inflation, straining economic recovery efforts in numerous import-dependent economies.
Governments and central banks in several major economies are closely watching movements in energy prices, mindful of the inflationary risks.
There are growing calls from some quarters for coordinated releases of strategic petroleum reserves by world powers to help cool markets and signal a buffer against supply shocks.
Economists caution that even if the military conflict eases, the oil market could remain volatile for weeks or months as damaged infrastructure, shipping bottlenecks and geopolitical risk premiums continue to shape trading behaviour.
