Oil and gas markets have been thrown into turmoil as escalating military exchanges between the United States (US) and Israel on one side and Iran on the other threaten critical energy infrastructure across West Asia and disrupt shipping through the Strait of Hormuz.
Since the conflict intensified on February 28, attacks on energy facilities, shipping disruptions and insurance withdrawals have pushed global oil prices sharply higher and raised fears of a broader supply shock.
Brent crude climbed above $83-$84 a barrel on March 5, its highest level since mid-2024, while West Texas Intermediate (WTI) rose to around $77 a barrel, marking a fifth consecutive day of gains. Prices have risen roughly 10-13 per cent since the escalation, with analysts estimating that geopolitical risk has added a $5-$10 per barrel premium.
The crisis centres on the Strait of Hormuz, one of the world’s most important energy corridors. Roughly 20 per cent of global oil supply and significant liquefied natural gas (LNG) shipments pass through the narrow waterway connecting the Persian Gulf to global markets.
Iranian officials have threatened to close the passage, warning they would target vessels attempting to transit the strait. More than 150 oil and LNG tankers are currently anchored in surrounding waters as shipping companies avoid the route amid rising security risks.
The standoff has alarmed global energy markets, with analysts warning that a prolonged shutdown of the strait could push oil prices beyond $100 per barrel and potentially as high as $150 if major supply routes remain blocked.
The conflict has already disrupted several key energy facilities across the Gulf region.
Saudi Arabia’s largest refinery, the Ras Tanura Refinery has reportedly been shut as a precaution following drone attacks, while QatarEnergy halted LNG production at two processing sites.
A drone-related fire was also reported at a facility in the United Arab Emirates’ Fujairah Port, while Iraq has cut oil production by about 1.5 million barrels per day amid security concerns.
Energy infrastructure near Duqm Port has also faced security alerts, signalling the widening geographic reach of the conflict.
The largest impact, however, may be felt in Asia’s LNG markets. According to analysts at S&P Global, the effective closure of the Strait of Hormuz is rapidly tightening global LNG supply.
Around 17 per cent of global LNG deliveries in 2026 normally transit the strait, with more than 90 per cent of those cargoes destined for Asian buyers.
Spot LNG prices have already surged, with the Platts JKM benchmark jumping to about $25 per million British thermal units, one of the sharpest daily increases since the 2022 energy crisis.
Countries most exposed include Pakistan, where 99 per cent of LNG imports come from Qatar, while India relies on Qatar and the UAE for 59 per cent of its LNG supply.
The crisis has been compounded by maritime insurers withdrawing war-risk coverage for vessels operating in the Gulf from March 5, a move expected to dramatically increase shipping costs.
According to maritime insurance brokers, premiums could surge from around 0.25 per cent of a vessel’s value to between 0.5 per cent and 1 per cent or higher, effectively doubling or even tripling operating costs for tankers transiting the region.
The disruption has already begun affecting consumer fuel markets. Pump prices have started to rise across the UK and Europe, while heating oil prices in Northern Ireland have jumped sharply, with some suppliers raising the cost of 500 litres from about £307 to as much as £425.
Governments and energy markets are scrambling to assess the risks of prolonged disruption. US President Donald Trump has proposed escorting and insuring tankers through the strait, though analysts say the plan could take time to implement.
Meanwhile, Micheál Martin warned against speculative price increases in Europe, saying there was “no excuse” for excessive fuel price hikes where supply sources remain unaffected.
Despite current supply buffers, energy analysts caution that continued attacks on infrastructure or a sustained blockade of the Strait of Hormuz could trigger a deeper global energy shock, reviving the type of market instability seen during earlier West Asian crises and the 2022 energy crunch.
For now, markets remain on edge as traders weigh geopolitical risk against the possibility of diplomatic intervention or military escorts reopening one of the world’s most critical energy corridors.