U.S. and Israeli strikes on Iran on February 28 under Operation Epic Fury have resulted in a near-total commercial shutdown of the Strait of Hormuz. Approximately 20 million barrels per day, or about 20 percent of global petroleum liquids supply, normally transit the strait.
As of March 4, tanker traffic through the corridor is down roughly 80 percent. Major shipping operators including Maersk, Hapag-Lloyd, MSC, and CMA CGM have suspended transits. War risk insurance coverage has been withdrawn effective March 5, removing the economic feasibility of most voyages through the strait.
Brent crude has risen 17 percent in four trading sessions to $83.44 per barrel. OPEC+ approved a 206,000 barrel per day production increase for April, but the decision has limited near-term impact while export routes remain constrained.
Analysis from Goldman Sachs suggests current prices are consistent with roughly four weeks of disruption. A reopening within that window would likely return Brent toward the $65 to $70 range. A disruption lasting longer than four to six weeks materially increases the probability of $100 oil.
Market Response
Crude prices moved sharply following the February 28 strikes.
Closing prices
| Benchmark | Feb 27 | March 4 | Change |
|---|---|---|---|
| Brent | $71.22 | $83.44 | +17.2% |
| WTI | $67.81 | $76.26 | +12.5% |
| Brent-WTI spread | $3.41 | $7.18 | +$3.77 |
| US gasoline average | $2.98/gal | ~$3.10/gal | ~+4% |
The widening Brent-WTI spread reflects the greater exposure of internationally traded crude to Middle Eastern supply risk. US production, priced primarily off WTI, does not rely on Hormuz transit and therefore trades at a relative discount during Gulf disruptions.
Goldman Sachs has stated that absent supply disruption, fair value for Brent is near $65 per barrel. The move to $83 implies the market is embedding a temporary risk premium rather than a structural repricing.
A one dollar move in crude typically translates to roughly 2 to 3 cents per gallon at the retail pump within several days, subject to regional variation.
Strait of Hormuz Disruption
The Strait of Hormuz is approximately 33 kilometers wide at its narrowest point, with navigable lanes of roughly 3 kilometers in each direction. According to the US Energy Information Administration, more than 20 million barrels per day transited the strait in 2024, accounting for about one fifth of global petroleum liquids consumption. Roughly 20 percent of global LNG exports move through the same corridor.
Exports through the strait originate primarily from Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the UAE. Approximately 70 percent of these flows are destined for Asian markets, particularly China, India, Japan, and South Korea.
Vessel tracking data indicates traffic has fallen by around 80 percent. At least five tankers have reportedly been struck. Two crew fatalities have been confirmed. Approximately 150 vessels are waiting outside the chokepoint.
Alternative routes are limited. Saudi Arabia’s East-West pipeline can redirect some crude to the Red Sea. The UAE’s Abu Dhabi Crude Oil Pipeline bypasses Hormuz and terminates at the Gulf of Oman. Even combined, these routes cannot fully offset lost seaborne volumes.
Iranian drone strikes have also targeted facilities operated by Saudi Aramco at Ras Tanura, one of the world’s largest oil export terminals. In addition, Qatar has suspended LNG export loadings as a precaution. These outages are separate from transit constraints and compound the supply risk.
OPEC+ April Production Decision
On March 1, eight core OPEC+ members approved a 206,000 barrel per day production increase for April. The move resumes a previously paused unwind of voluntary cuts.
Country contributions include:
- Saudi Arabia: 62,000 b/d
- Russia: 62,000 b/d
- Iraq: 26,000 b/d
- UAE: 18,000 b/d
- Kuwait: 16,000 b/d
- Kazakhstan: 10,000 b/d
- Algeria: 6,000 b/d
- Oman: 5,000 b/d
The practical impact is constrained. Iraq, Kuwait, Saudi Arabia, and the UAE primarily export through Hormuz. Incremental supply cannot reach global markets if transit remains disrupted.
OPEC+ spare capacity is estimated near 3.5 million barrels per day. The group retains flexibility to pause or reverse the increase at its next meeting on April 5.
US Production and the Strategic Petroleum Reserve
US crude production averaged 13.6 million barrels per day in 2025, according to the US Energy Information Administration. Output for 2026 is projected near 13.5 million barrels per day.
Regional breakdown:
- Permian Basin: 6.1 million b/d
- Bakken: 1.3 million b/d
- Eagle Ford: 1.1 million b/d
US production does not depend on Hormuz transit. However, shale response times are measured in quarters rather than weeks. Drilled but uncompleted well inventories are near multi-year lows, limiting rapid output increases.
The Strategic Petroleum Reserve holds roughly 370 million barrels. A drawdown of 1 million barrels per day could supply the market for approximately one year, though the price effect would likely be front-loaded and psychological. Coordinated releases by the International Energy Agency remain possible, although member countries account for less than half of global demand.
Pre-Conflict Market Context
Before the strikes, consensus forecasts pointed to oversupply in 2026.
The US Energy Information Administration projected Brent averaging $58 per barrel for 2026. Goldman Sachs projected $64 for full year 2026 with $60 in the fourth quarter. A Reuters survey of economists showed a consensus near $64.
Global demand was expected to reach roughly 104 to 105 million barrels per day, with supply growth led by the United States, Brazil, Canada, and Guyana. Inventory builds were projected into 2027.
The March Short-Term Energy Outlook, due March 10, will be the first official US government forecast incorporating the conflict.
Scenario Analysis
Current prices reflect a mid-range disruption assumption.
Short disruption, under four weeks
US military operations degrade Iran’s ability to sustain tanker interdictions. Shipping resumes and Gulf exports normalize. Risk premiums unwind. Brent returns toward $65 to $70 in line with pre-conflict fundamentals.
Extended disruption, beyond four to six weeks
Insurance markets remain closed. Infrastructure outages persist. Asian buyers move into emergency procurement. Spare capacity cannot be deployed efficiently due to transit constraints. In this scenario, Brent above $100 becomes plausible.
Historical parallels include the supply shock following the 1979 Iranian Revolution, which contributed to sustained price spikes and broader inflationary pressure.
Key Monitoring Indicators
Primary variables to watch include:
- AIS tanker traffic through Hormuz
- Iranian naval and missile strike capability
- Restart timelines for Ras Tanura and Qatari LNG loadings
- SPR release authorization
- The April 5 OPEC+ meeting
- Dubai crude differentials and Asian spot premiums
- The March 10 US Energy Information Administration outlook
Conclusion
The underlying oil market entering 2026 was structurally long. That condition has not disappeared. If the disruption resolves within several weeks, the pre-conflict supply overhang should reassert itself and prices would likely retrace.
A prolonged blockade is different. Sustained prices above $100 would tighten global financial conditions, raise inflation risks, and place pressure on both OPEC+ and major consuming nations to respond.
At $83 Brent, the market is pricing a temporary shock, not a structural break. The duration of the disruption remains the decisive variable.
Editorial Disclosure. This report is for informational and educational purposes only. This article includes subjective analysis and expert commentary from the writer. It is based on verified press releases and corporate announcements regarding Operation Epic Fury and global energy markets as of March 4, 2026. This content does not constitute financial or technical advice. Read our full Disclaimer.
