Global oil markets are bracing for potential volatility as geopolitical tensions between the US and Iran raise the risk of a sharp price surge, with analysts warning crude could jump by as much as $15 a barrel if the standoff escalates from rhetoric to direct action.
Brent crude and West Texas Intermediate have already begun to climb amid mounting uncertainty, with Brent recently trading above $71 a barrel and US crude hovering near $66, marking their highest levels since last summer. Prices have risen steadily in recent weeks as traders weigh the probability of military escalation against ongoing diplomatic efforts to reach a new agreement over Iran’s nuclear programme.
Market analysts say the current pricing reflects cautious optimism that tensions will remain contained but warn that any disruption to supply routes or production could trigger a swift and significant rally. Daniela Hathorn, senior market analyst at Capital Economics, noted that markets appear unusually calm given the geopolitical backdrop. “This muted response suggests investors are either sceptical of imminent escalation or confident that any conflict would be short-lived.
However, if tensions move from rhetoric to action, oil could spike rapidly,” she said, adding that a move of up to $10–$15 per barrel cannot be ruled out in a worst-case scenario.
The strategic importance of Iran in global energy markets amplifies the potential impact of any disruption. Iran produces roughly 3.2 million barrels of crude per day, accounting for about four per cent of global supply, and holds some of the world’s largest proven oil reserves. More critically, the country sits along the Strait of Hormuz, one of the most vital energy chokepoints globally. Around 20 million barrels of oil per day — close to one-fifth of global consumption — pass through the narrow waterway connecting the Gulf to international markets.
Any threat to shipping through the Strait of Hormuz tends to trigger immediate price reactions. Earlier this week, temporary military drills and partial restrictions in the strait pushed Brent prices up by about $5 per barrel within days.
Analysts say a prolonged disruption could send oil above $100 a barrel, though most believe such a scenario remains unlikely. Rob Thummel, senior portfolio manager at Tortoise Capital, said markets are pricing in only limited disruption for now. “A sustained blockage of the Strait of Hormuz would be the most significant bullish catalyst for oil and could easily push prices above $100. However, historically such disruptions have been short-lived,” he said.
The global supply outlook is already tight in parts of the market, making prices more sensitive to geopolitical shocks. Opec+ continues to manage output cautiously, while demand remains resilient across Asia and emerging markets. The International Energy Agency expects global oil demand to grow by around 1.1 million barrels per day this year, driven largely by transport, aviation and petrochemical consumption in developing economies.
At the same time, spare production capacity is concentrated in a handful of Middle Eastern producers, limiting the speed at which additional supply could offset disruptions. Analysts at Goldman Sachs have previously noted that geopolitical risks in the Gulf region could add a risk premium of $5–$10 per barrel even without actual supply losses, as traders factor in uncertainty over shipping routes and infrastructure security.
Energy markets have responded sharply to similar geopolitical events in the past. During a brief escalation involving regional strikes in mid-2025, oil prices rose about four per cent in the days leading up to hostilities and jumped more than ten per cent in the immediate aftermath before stabilising weeks later. The drone attacks on Saudi Aramco facilities in 2019, which temporarily knocked out roughly five per cent of global oil supply, triggered one of the largest single-day price surges on record, although prices retreated within weeks as production recovered.
Analysts stress that even if tensions escalate, any price shock may prove temporary unless there is a sustained disruption to supply or shipping.
Iran itself depends heavily on oil exports for government revenue, making a prolonged blockade of major shipping routes economically challenging. Moreover, global strategic petroleum reserves and spare capacity among major producers could help stabilise markets if disruptions occur.
Energy traders remain cautious. Brent has already climbed around seven per cent in recent days and could move higher if geopolitical risks intensify or negotiations falter. Some forecasts suggest that oil prices returning to the $80–$90 per barrel range in the short term would be enough to lift fuel costs globally and add to inflationary pressures across major economies.
Analysts say for now, the oil market remains finely balanced between diplomacy and disruption. With geopolitical developments evolving rapidly and supply risks concentrated in one of the world’s most critical energy corridors, analysts say volatility is likely to remain elevated. “Whether prices stabilise or surge will largely depend on how events unfold in the coming weeks, underscoring the continued sensitivity of global energy markets to geopolitical uncertainty.”
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