Oil prices surge, cross $80 after US-Iran conflict engulfs Middle East, Strait of Hormuz
In the days after the so-called "12-day war" between Israel and Iran in June 2025, "There really wasn't a physical disruption to flows, and that's what you saw an increase and then almost an immediate fall back [because] there was no supply disruption," Ben Cahill, a non-resident fellow at the Arab Gulf States Institute, told Yahoo Finance.
This time, Cahill said, feels different, especially given the attacks already seen on tankers in the Strait of Hormuz. For the oil markets, physical disruption — especially through the Strait — will drive prices over the next days and weeks.
Any sustained disruption to the Strait would also hurt Iran, which exports the vast majority of its seaborne crude shipments through the waterway. But the regime may have assessed the potential economic hit as a necessary pain, analysts told Yahoo Finance.
"Unlike the 12 day war and other flare ups in recent years, the incentives for the Iranians have likely shifted to escalation and not de-escalation, as the regime looks to save face and protect its survival," Capital analyst Kyle Rodda wrote in emailed commentary.
Pricing pressure will also show up in the insurance market for crude oil tankers. While the war risk premium hasn't yet triggered blanket policy cancellations in the crude tanker insurance market, a key variable for global oil pricing, insurance analysts who spoke with Yahoo Finance said that prices are jumping steeply and policies are being reworked.
Insurers are now making coverage conditional, placing routing restrictions on contracts and demanding voyage approval, and refusing to give quotes for specific routes and situations. The result, the insurance analysts said, is that owners are "choosing not to transit rather than accept terms that make voyage economics unworkable."
In a regularly scheduled monthly meeting on Sunday, the OPEC+ cartel, of which Iran is a founding member, raised its production quota by 220,000 barrels per day, above the expected 137,000 bpd adjustment.
Rumors in the oil industry had suggested that the bloc might opt to significantly increase its production quotas in an attempt to "mute some upside pressure on prices Monday morning, but only marginally in the face of heightened geopolitical risk," Rystad Energy head of geopolitical analysis Jorge León told Yahoo Finance.
The move is unlikely to dent the impact of the war premium. Most of the OPEC member countries' capacity move through the Strait and have now been cut off from the market, according to consultancy Wood Mackenzie. Right now, León said, "markets are more concerned with whether barrels can move than with spare capacity on paper."
"The key question is when do vessels re-establish export flows," said Alan Gelder, senior vice president of refining, chemicals and oil markets at Wood Mackenzie. If tanker flow is not "quickly restored," prices could cross $100 per barrel, according to Wood Mackenzie analysis.
"Given the scale of retaliation, most of the strategic initiative now lies with Iran," León told Yahoo Finance. "How Tehran chooses to respond over the next 24-72 hours — especially toward energy infrastructure or regional shipping — will be the primary driver of near-term oil market dynamics."
Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.co
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