Oil prices crossed $110 per barrel for the first time since early 2022, when the Russian invasion of Ukraine sent energy markets into a tailspin. What is unfolding now may be even more alarming. Since late February, crude prices have surged more than 50% on international markets, making this the fastest oil rally recorded in roughly four decades.
Both Brent crude and West Texas Intermediate jumped more than 25% in a single overnight session, breaching the $110 threshold by Sunday night. WTI has climbed more than 60% since the conflict began. Markets opened Monday morning with futures already in retreat. The S&P 500 and Nasdaq 100 each shed about 1.5%, while the Dow fell nearly 2%.
The Hormuz chokepoint
At the center of the crisis is the Strait of Hormuz, a narrow waterway connecting the Persian Gulf to the broader global market. About 20 million barrels of oil flow through it every day, accounting for roughly a fifth of the world’s seaborne crude supply. Since the conflict began, approximately 16 million barrels per day have been stranded on the wrong side of the strait, cut off from buyers worldwide.
The disruption began after the United States and Israel launched airstrikes against Iran on Feb. 28, killing Supreme Leader Ali Khamenei. What followed was a rapid escalation that has since pulled in much of the broader Middle East. Missiles and drone strikes have targeted airports, residential buildings, military installations and other infrastructure across Saudi Arabia, the United Arab Emirates, Bahrain, Oman and other neighboring countries.
Energy infrastructure under fire
The conflict has increasingly zeroed in on the region’s energy backbone. Bahrain’s Bapco Energies refinery has been struck. Saudi Arabia’s Ras Tanura refinery has gone offline. Qatar’s Ras Laffan liquefied natural gas complex has declared force majeure. Oil tankers navigating the Persian Gulf have come under missile and drone fire, and Iran’s Revolutionary Guards have threatened any vessel that attempts the crossing, even as the passage remains nominally open.
With no safe route to market, producers have started pulling back. Iraq has cut roughly 60% of its oil output. Kuwait has also begun winding down production. Analysts project that if the strait remains unnavigable, production cuts could reach 3.3 million barrels per day by day eight, climbing to 3.8 million by day 15 and potentially 4.7 million by day 18.
Civilian infrastructure now a target
The stakes have grown beyond oil. Bahrain’s Ministry of Interior confirmed that a major desalination plant was damaged in a drone strike over the weekend. In a region where desalination provides much of the drinking water, attacks on that infrastructure carry consequences that extend far beyond energy markets.
What it means at home
Americans are already seeing the impact at the gas pump. The national average for a gallon of regular gasoline reached $3.45 on Sunday, up 15% from $2.98 just one week earlier. Financial analysts warn that further price increases are likely if the crisis drags on, with projections suggesting crude could climb to $150 or higher if the strait closure continues for several more weeks.
The broader economic picture is equally sobering. A sustained rise in oil prices could push global inflation up by nearly a full percentage point while shaving global growth by nearly half a point, according to economic modeling. With no diplomatic resolution in sight and energy infrastructure burning across the Gulf, markets are bracing for the crisis to get worse before it gets better.
