Iran conflict could result in a 1970s style oil embargo amid Strait of Hormuz closure, worry experts — What it means
Oil markets are gearing up for a likely supply shock after US and Israel strikes on Iran already shot up oil prices sharply amid fears that the Strait of Hormuz might be closed for weeks, disrupting the flow.
Brent crude prices jumped 9% to $79.42 a barrel, while US crude climbed 8.6% to $72.61 per barrel.
While analysts had already predicted a “knee-jerk” reaction to oil prices when trading resumed in New York, the bigger question loomed of whether a sustained conflict in the Middle East could mean a prolonged disruption in supply.
All eyes on Strait of Hormuz
The Strait of Hormuz, a narrow channel that is responsible for the flow of around one-fifth of oil production in the world, gained focus as conflict in the Middle East showed no signs of stopping amid US and Israel’s strikes on Iran.
US President Donald Trump suggested to the Daily Mail the conflict could last for four more weeks, while saying in a post that the strikes will continue until the objectives of the US were met.
However, any disruption in the Strait of Hormuz could directly contribute to an outsized and immediate consequence on global oil and LNG flows.
While the vital waterway has not yet been blocked, Reuters earlier reported that an official with the European Union’s naval mission, Aspides, had said that commercial vessels received VHF radio messages from Iran’s Revolutionary Guards warning that “no ship is allowed to pass the Strait of Hormuz.”
However, Tehran has not officially confirmed anything on the closure of the Strait of Hormuz yet.
Lying between Oman and Iran, Strait of Hormuz serves as a critical artery for oil flows as well as their disruption across the globe. Marine tracking sites showed tankers piling up on either side of the strait wary of attack or maybe unable to get insurance for the voyage.
According to Kpler data, about 13 million barrels of oil flowed through the route in 2025, which is approximately 31% of all seaborne oil flows around the globe.
A prolonged spike in oil prices would risk reigniting inflationary pressures globally, while also acting as a tax on business and consumers that could dampen demand, as per a Reuters report.
What experts say
Experts and analysts have warned that a significant upward pricing of oil may continue until there is a de-escalation of the conflict.
“The most immediate and tangible development affecting oil markets is the effective halt of traffic through the Strait of Hormuz, preventing 15 million barrels per day (bpd) of crude oil from reaching markets,” Jorge Leon, head of geopolitical analysis at Rystad Energy, was quoted as saying by Reuters.
“Unless de-escalation signals emerge swiftly, we expect a significant upward repricing of oil.”
OPEC did agree a modest oil output boost of 206,000 barrels per day for April on Sunday, but a lot of that product still has to get out of the Middle East by tanker.
Saul Kavonic, head of energy research at MST Marquee, told CNBC that a threatened Iranian regime may go ahead to block the Strait of Hormuz, even as the US and its allies will likely protect the flows by deployed military escorts to the ships.
“This could present a scenario three times the severity of the Arab oil embargo and Iranian revolution in the 1970s, and drive oil prices into the triple digits, while LNG prices retest the record highs of 2022,” Kavonic said.
