MARCH 9, 2026
Oil has surged toward $120 a barrel and G7 finance ministers convened an emergency call today on strategic reserve releases. The disruption, economists warn, may be only beginning.
When airstrikes on Iran began on February 28, 2026, energy markets had already been watching the region with growing unease. What followed in the nine days since has amounted to the most significant disruption to global oil flows in the modern history of the Strait of Hormuz, a narrow waterway that, until recently, carried approximately 20 percent of the world’s daily oil supply.
As of Monday morning, oil prices surged toward $120 per barrel, after briefly topping $100 for the first time since Russia’s 2022 invasion of Ukraine over the weekend. The average price of a gallon of regular gasoline in the United States has risen 16 percent in a single week, reaching $3.45 nationally according to AAA, up from under $3 before the strikes. G7 finance ministers convened an emergency call Monday to discuss a coordinated release of strategic petroleum reserves, a potential injection of 300 to 400 million barrels into global markets, though no agreement had been reached by Monday afternoon. And according to analysts across the energy sector, the worst may still lie ahead. News of the G7 meeting have dropped crude oil futures just below $100 and may mean some temporary relief from the worst-case scenario.
The Chokepoint the World Cannot Afford to Lose
The Strait of Hormuz is the most consequential energy chokepoint on the planet. In 2024, an average of 20 million barrels of oil per day flowed through it, roughly one-fifth of global petroleum consumption. Approximately 22 percent of global liquefied natural gas (LNG) trade passes through the same corridor, primarily from Qatar.
Following Iran’s missile and drone strikes on Gulf states, including Saudi Arabia, Qatar, and the UAE, the Islamic Revolutionary Guard Corps issued warnings prohibiting commercial vessel passage through the Strait. Tanker traffic dropped by approximately 70 percent within the first 24 hours. Within days, it fell to near zero. Over 150 ships anchored outside the strait, and major shipping firms suspended regional operations entirely.
“We have not seen anything like this in pretty much the history of the Strait of Hormuz,” said Claudio Galimberti, chief economist at Rystad Energy, comparing the disruption to blocking the aorta in a circulatory system.
Iran has not needed to physically close the Strait with naval assets. The threat alone, backed by drone and missile attacks on vessels transiting the region, has been sufficient to halt commercial traffic. Maritime war-risk insurers have either withdrawn coverage entirely or dramatically increased premiums, leaving ship operators effectively unable to transit the corridor without assuming catastrophic uninsured liability.
Alternative Routes Exist, But Fall Far Short
Saudi Arabia and the UAE maintain pipelines capable of bypassing the Strait, most notably the Saudi East-West Pipeline running to Yanbu on the Red Sea. The U.S. Energy Information Administration (EIA) estimates that approximately 2.6 million barrels per day of pipeline capacity could potentially be redirected around the Strait. Saudi Arabia has reportedly begun diverting some crude exports through this route, and Pakistan has already formally requested Saudi Arabia reroute shipments through the Red Sea port of Yanbu.
But these alternatives represent only about 17 percent of the volume that typically flows through the Strait. The IEA estimates that even utilizing all available spare pipeline capacity, roughly 16 million barrels per day of oil flows would remain at risk from a full closure. As one analysis put it: “The strait does not have a functional substitute.” Iran has also struck at least two pipeline and energy infrastructure sites in the Gulf region since the conflict began, further narrowing diversion options.
What This Means at the Pump, and Beyond
The United States is currently the world’s largest oil producer, pumping more crude than any country in history. That domestic production has provided meaningful insulation from global price shocks, and has likely prevented gasoline prices from already exceeding $4 or $5 per gallon. But it has not made American consumers immune.
Oil is a globally traded commodity. When supply is disrupted anywhere, prices rise everywhere. The United States also imports certain grades of crude and refined petroleum products, particularly diesel, kerosene, and heavier fuel oils, that its domestic production does not fully replace. As global crude benchmarks surge, those costs are transmitted directly to American consumers. Notably, not all countries will feel that transmission equally. I published research with co-authors a few years ago and found that national fuel price regimes are a significant determinant of how much of a crude oil price shock reaches the retail pump, with countries operating liberalized fuel markets, like the United States, feeling more of the pass-through than those with government-managed or subsidized pricing. Gulf consumers, whose governments subsidize domestic fuel, are likely to be more shielded from the very price shock their region is generating.
Analysts at GasBuddy projected in early March that the crude price spike would push U.S. gasoline prices up by 10 to 30 cents per gallon in the near term, with some individual stations seeing increases as high as 85 cents. With oil now past $100 a barrel, pump prices above $4 nationally are widely considered likely if the disruption persists. JPMorgan’s commodities research team has projected Brent crude could reach $120 per barrel under a sustained disruption scenario; Deutsche Bank has modeled prices approaching $200 per barrel if Iran succeeds in enforcing a full naval closure through mines and anti-ship weapons.
The Persian Gulf region produces approximately 20 percent of global LNG supply, primarily through Qatar, which declared force majeure on its gas exports after Iranian drone strikes hit its facilities. QatarEnergy, operator of the world’s largest LNG export facility, halted activity following the attack. European natural gas futures have already risen more than 30 percent. Natural gas prices in the United States have already climbed 10 percent over the past year and are likely to move higher still, with direct consequences for home heating and electricity bills.
Grocery bills are another area where Americans should expect pressure. Fertilizer production is highly energy-intensive and heavily concentrated in the Gulf region. A sustained disruption to that supply chain will raise input costs for farmers, which flow through to the price of staple crops including wheat, corn, and soybeans, and eventually to bread, cereal, cooking oils, and meat. The Food Policy Institute has already warned of long-term food price increases tied to the simultaneous disruption of fuel and fertilizer markets.
Trucking is a second pressure point with broad reach. Nearly every product Americans buy moves by diesel-powered truck at some point in its journey. A South Carolina meal delivery operator told CNN this week that rising fuel costs were already squeezing his margins to the breaking point. A trucking company owner in Illinois reported that the fuel spike had added roughly $100 to his weekly operating costs, with rate increases likely to follow. When freight rates rise, those costs ripple outward across the entire retail supply chain, adding to the sticker price of groceries, hardware, clothing, and household goods.
Air travel will also become more expensive. Jet fuel prices are closely tied to crude oil, and airlines have little ability to absorb a sustained spike of this magnitude without passing costs to passengers. The Gulf is home to major aviation hubs connecting East and West, and those routes have been disrupted or suspended entirely, adding further pressure to flight availability and pricing. The Gulf is also a center of aluminum smelting, an energy-intensive industry that depends on cheap regional power. Higher aluminum prices feed into the cost of canned goods, beverages, packaging, and durable goods across the economy.
Goldman Sachs has projected that if oil prices remain at current levels for several months, U.S. consumer price inflation could rise from 2.4 percent in January to 3 percent by year’s end. That projection was issued before oil crossed $100 a barrel. Former Federal Reserve Chair Janet Yellen warned this week that, depending on the conflict’s duration, economic growth will suffer and the Fed’s effort to contain inflation will become materially more difficult. If the Fed is pushed to raise interest rates in response, the costs extend further still: higher mortgage rates, more expensive car loans, and tighter credit conditions for businesses and consumers alike.
Why the Crisis May Be Slow to Fully Materialize
Energy analysts and historians of past oil crises note a consistent pattern: the full economic impact of supply disruptions takes months to arrive, not days. After Russia’s invasion of Ukraine in February 2022, U.S. gasoline prices did not peak until June of that year. The same delayed progression characterized the 1973 Arab oil embargo and the 1979 Iranian Revolution, both events that ultimately produced price spikes of 150 to 400 percent.
In the short term, markets are buffered by existing stockpiles. China, the world’s largest crude importer, has reportedly accumulated reserves of roughly one billion barrels, approximately half its storage capacity. Saudi Arabia has been moving oil out of the Gulf at an accelerated pace over recent weeks, pre-positioning crude in reserves in the Red Sea, the Netherlands, and South Africa. These inventories will moderate the immediate shock.
But those buffers are finite. And the production problem compounds the logistics problem. Oil fields and processing facilities do not simply switch off and restart. Shutting in production, as producers are being forced to do with Gulf exports stranded and storage capacity filling, takes time to reverse. Infrastructure that has been physically damaged by Iranian strikes will require years and specialized labor to rebuild. Much of the engineering workforce needed to operate and repair Gulf energy facilities comes from the United States, Europe, and Asia, and those workers are unlikely to return to an active war zone quickly.
As Natasha Kaneva, head of global commodities research at JPMorgan, wrote to clients this week: “Our base case assumed that an unprecedented disruption would remain improbable. That assumption failed.”
The Government Response
Treasury Secretary Scott Bessent issued a 30-day sanctions waiver on Russian oil sales to India, an effort to ease supply pressure, though officials described the move as narrowly targeted and unlikely to provide significant market relief.
The administration’s most significant intervention came on March 3, when Trump announced via social media that he had ordered the U.S. International Development Finance Corporation (DFC) to provide political risk insurance and financial guarantees for all maritime trade in the Gulf, and that the U.S. Navy would begin escorting tankers through the Strait “if necessary.” The DFC, which normally mobilizes private capital for development projects in emerging economies, followed up on March 7 with a formal $20 billion reinsurance program covering hull, machinery, and cargo losses on a rolling basis, coordinated with U.S. Central Command. Treasury Secretary Bessent told Fox Business that the combined insurance and escort plan “should quickly fix shipping in the region,” adding: “I don’t know whether it’s a week or two weeks, but we are on track to get this solved.”
Analysts and shipping industry leaders greeted the plan with cautious skepticism. USNI News reported that the Navy told shipping industry leaders it does not currently have vessels available for escort duty, with guided-missile destroyers committed to strike operations against Iranian targets and missile defense. Rapidan Energy’s Bob McNally, a former White House official, noted that escorts and insurance can only work once Iran’s ability to mine and attack ships with anti-ship missiles and drones has first been suppressed. As of Monday, private insurance offerings had not been sufficient to entice ships and their crews back into the Strait, with shipowners citing crew safety in an active war zone as the primary obstacle beyond the insurance gap itself.
President Trump has taken a measured public tone on gasoline prices. “If they rise, they rise,” he told reporters this week, characterizing the energy spike as “a very small price to pay” for the objectives of the military campaign. OPEC+ approved a modest production increase of 206,000 barrels per day at its scheduled meeting, a figure that surprised analysts expecting a larger response, though energy analyst Helima Croft of RBC noted that the increase may be largely academic without the Strait open to move the barrels to market.
Strategic Reserves: A Pressure Valve, Not a Fix
With Brent crude approaching $120 a barrel on Monday morning, G7 finance ministers convened an emergency virtual call, organized by France as the current G7 presidency, to discuss a coordinated release of strategic petroleum reserves. The International Energy Agency explicitly requested the coordinated release during the meeting according to Japan’s finance minister. U.S. officials have expressed support for releasing between 300 and 400 million barrels from global stockpiles, which would represent roughly 25 to 30 percent of IEA member reserves and the largest such intervention in the agency’s 52-year history. The announcement of the potential release caused prices to pull back from their highs, with Brent retreating toward $100 per barrel, though G7 nations had not reached final agreement as of Monday afternoon, with France’s representative stating the group was “not there yet” on a deal.
A coordinated reserve release would provide meaningful near-term relief, but analysts caution it is not a structural solution. The IEA’s emergency mechanism has been activated five times in its history, including during the 1991 Gulf War, after Hurricane Katrina in 2005, during the 2011 Libyan crisis, and twice following Russia’s 2022 invasion of Ukraine. In none of those cases did it involve the total closure of the Strait of Hormuz. Consulting firm Rapidan Energy described the current disruption as the largest oil supply shock in history, and noted that strategic reserves alone cannot offset the volume of oil currently bottled up in the Persian Gulf. Unlike past shocks, there is effectively no spare production capacity available to compensate, because the countries that hold it, primarily Saudi Arabia and the UAE, are themselves cut off from global markets by the Strait closure.
For American consumers, a reserve release would likely translate to a temporary dip or stabilization in gasoline prices, not a return to pre-war levels. The underlying supply problem remains unsolved as long as the Strait stays effectively closed and Gulf infrastructure remains damaged or at risk.
Scenarios: How This Could Unfold
Analysts have identified a range of outcomes depending primarily on the duration of the conflict and the extent of continued infrastructure damage.
Short conflict, limited damage: If hostilities end within days and a diplomatic framework emerges, oil prices could retreat to the $60-$70 range, per Bank of America. This scenario requires rapid cessation of Iranian strikes on Gulf infrastructure, something Iran has shown little inclination toward.
Weeks of disruption: Goldman Sachs estimates that a four-week full halt to Strait flows would correspond to roughly a $14 per barrel premium above pre-conflict prices. JPMorgan projects Brent in the $120 range. U.S. gasoline prices would likely exceed $4 nationally, with some regional markets significantly higher.
Extended conflict or regime collapse: Deutsche Bank modeled Brent approaching $200 per barrel in the event of full Iranian naval enforcement of a Strait closure. JPMorgan’s Kaneva noted that regime collapse in Iran, a distinct risk following the killing of Khamenei, would put Iran’s own 3-plus million barrels per day of production at risk as well, since oil prices typically spike more than 70 percent when regime change occurs in a major crude producer.
The Pain You Haven’t Felt Yet
One of the most important and least discussed aspects of oil price shocks is that their full economic consequences are not immediate. The disruption at the source and the pain felt by consumers and businesses are separated by weeks and months of cascading follow-on effects, working their way through supply chains, shipping contracts, refinery operations, and ultimately retail pricing.
After Russia invaded Ukraine in February 2022, U.S. gasoline prices did not peak until June, four months later. The 1973 Arab oil embargo similarly took months to fully register at the pump and in the broader economy, eventually contributing to a recession that lasted into 1975. The 1979 Iranian Revolution produced the same pattern: a gradual climb that surprised people who had expected the shock to be short-lived.
The mechanism is straightforward. Refineries operate on crude oil purchased weeks or months in advance under long-term contracts. When those contracts expire and must be renegotiated at higher spot prices, the cost increase flows through to wholesale fuel prices, then to retail. Fertilizer bought at pre-crisis prices plants crops that won’t be harvested until fall. Shipping contracts signed before the war expire and renew at dramatically higher freight rates. Each link in the chain adjusts on its own timeline, meaning the aggregate hit to household budgets builds gradually rather than arriving all at once. Compounding this, my previous research has found that the price elasticity of gasoline with respect to crude oil peaks at roughly 0.36, meaning a 30 percent surge in crude translates to only about an 11 percent rise in retail gasoline prices in the short run. The full impact accumulates over subsequent months as contracts roll over and the price signal propagates through the supply chain.
Goldman Sachs has estimated that if oil prices remain at current levels through year-end, U.S. consumer price inflation could rise from 2.4 percent in January to 3 percent, a projection made before oil crossed $100 a barrel. That figure should now be treated as a floor, not a ceiling. Former Federal Reserve Chair Janet Yellen warned this week that a sustained oil shock would make the Fed’s job of containing inflation materially harder and could force a pause or reversal of any interest rate relief, keeping borrowing costs elevated well into 2027.
The Long-Term Shift: Crisis as Catalyst
History offers one consistent silver lining to sustained oil supply shocks: they accelerate the transition away from oil dependency. The 1973 crisis was the single most important catalyst for modern energy efficiency standards, nuclear expansion in France, and the first serious public investment in solar and wind technology. The 2022 Ukraine-driven energy shock in Europe triggered the fastest deployment of renewable electricity capacity in that continent’s history.
The current crisis arrives at a moment when alternatives are far more mature and cost-competitive than in any prior oil shock. The U.S. electricity grid is already in the midst of a rapid buildout, with the EIA projecting 69 gigawatts of new solar capacity and 19 gigawatts of new wind capacity coming online in 2026 and 2027. Electric vehicles, while still a minority of the U.S. fleet, are increasingly price-competitive with conventional cars. A sustained period of $4 to $5 gasoline would compress EV payback periods substantially and likely accelerate consumer adoption beyond current projections.
In aviation, the crisis adds fresh urgency to the buildout of sustainable aviation fuel, or SAF. Global SAF capacity is expected to expand by roughly one-third in 2026 alone, with production concentrated in Asia and exports flowing primarily to Europe. As jet fuel prices spike with crude, the economics of SAF, long challenged by the premium it carries over conventional fuel, become considerably more attractive to airlines facing otherwise unmanageable fuel cost exposure.
For shipping and heavy industry, the crisis puts renewed focus on hydrogen and ammonia as alternative fuels. Green ammonia, produced using renewable electricity, is carbon-free, energy-dense, and already produced and transported at global scale, primarily for fertilizer use. More than 60 methanol-capable vessels are already in operation globally, with 300 more on order. A prolonged period of elevated oil and LNG prices makes the business case for these fuel transitions considerably easier to close, accelerating investment decisions that might otherwise wait another decade.
Looking Ahead
The crisis arrives at a moment of particular vulnerability for global gas markets. European natural gas stockpiles are depleted heading into spring, leaving the continent with limited buffer against LNG supply disruptions. South and East Asian economies, which source the bulk of their oil from the Gulf, face the most acute near-term exposure and are likely to pivot toward Russian crude if disruptions persist, a development that would structurally strengthen Moscow’s strategic position regardless of the conflict’s outcome.
For American consumers, the next several weeks will likely bring continued price increases at the pump, higher utility bills as natural gas markets tighten, and growing pressure on the cost of staple goods. Whether those pressures crest into something more severe, a prolonged supply shock reminiscent of the 1970s oil crises, will depend on factors that remain beyond any single actor’s control: the pace of diplomacy, the outcome of today’s G7 deliberations, the survivability of regional energy infrastructure, and the behavior of a conflict that, by most accounts, neither its architects nor its adversaries fully anticipated.