Oil Prices Brace for Volatility After US and Israel Strikes on Iran

Oil markets are poised for significant price swings next week following the U.S. And Israel’s strikes on Iran, raising concerns about potential disruptions to global oil supplies. The attacks, which occurred on Saturday, February 28, 2026, have already prompted a rise in benchmark crude prices and sparked fears of a wider conflict in the Middle East.

Immediate Market Reaction

International benchmark Brent crude closed at a seven-month high of $72.87 on Friday, February 28, 2026, reflecting growing anxieties about supply disruptions . Futures on Brent crude jumped roughly 2.9% while US benchmark West Texas Intermediate (WTI) crude moved up by 2.8% by Friday’s close . Analysts predict potential price surges of $10 to $20 per barrel when markets reopen, contingent on the absence of de-escalation over the weekend .

Key Concerns: Strait of Hormuz and Iranian Exports

The primary concern revolves around potential disruptions to oil supplies, particularly through the Strait of Hormuz, a critical waterway through which approximately 20% of global oil supply passes daily . Saudi Arabia, Iraq, and the United Arab Emirates rely heavily on this strait for their exports.

Iran currently exports around 1.6 million barrels of oil per day, primarily to China, where privately-owned refineries are less affected by U.S. Sanctions . Any disruption to this supply could force Chinese customers to seek alternative sources, further driving up global prices.

Iran’s Position and Potential Responses

Analysts suggest Iran has limited incentive to close the Strait of Hormuz, as it would also impede its own exports and harm its key customer, China . Still, the scale of Iran’s retaliation over the next 24-72 hours, particularly any targeting of energy infrastructure or regional shipping, will be a primary driver of near-term oil market dynamics .

Iran’s Oil Production Capacity

Despite U.S. Sanctions imposed since 1979, Iran remains a significant oil producer, ranking among the world’s top ten . Currently producing roughly 3.1 million barrels per day, its production costs are relatively low, around $10 per barrel, making it a profitable producer . This is comparable to Saudi Arabia, Iraq, Kuwait, and the United Arab Emirates.

Looking Ahead

The situation remains highly fluid. The extent of the impact on oil prices will depend heavily on the unfolding geopolitical developments and Iran’s response to the strikes. Market participants are closely monitoring the situation for any signs of escalation or de-escalation that could further influence supply and demand dynamics.