Oil Hits $100 as Iran War Rattles Global Markets
Market Snapshot
The Signal
The driver is simple: the Strait of Hormuz, through which roughly 20% of the world’s oil and LNG normally passes, is effectively closed. After Iran’s Revolutionary Guard declared the strait off-limits and attacked several tankers, shipping insurers pulled back sharply. The US has offered naval escorts and up to $20 billion in insurance coverage for qualifying vessels, but JPMorgan estimates full coverage would require over $350 billion. Most shipowners are not moving.
The knock-on effects are already visible. Iraq, Kuwait, and Bahrain have cut oil field production because there is nowhere to send the output. Gulf infrastructure — refineries and LNG facilities in Bahrain, Qatar, Saudi Arabia, and the UAE — has been hit in strikes blamed on Iran. Unlike a simple shipping blockade, infrastructure damage takes months to repair after a conflict ends, not days.
For US consumers, the immediate pressure is at the pump. The national average gas price jumped $0.51 in one week, from $2.98 to $3.45. GasBuddy puts an 80% probability on $4 per gallon within a month if oil stays above $100. Diesel has risen $0.90 in the same period, hitting trucking and supply chain costs directly.
“We have gone from traders with ice in their veins to traders with panic in their veins.” — Rebecca Babin, CIBC Private Wealth
What To Watch
- →G7 announcement on strategic reserve releases — even a partial release could temporarily cap prices.
- →Strait of Hormuz shipping activity — reopening is the only structural fix. Any naval incident could spike prices again.
- →US CPI data due this week — energy prices will push the number higher, complicating the Fed’s rate path.
