Oil Prices Surge as U.S.-Iran Conflict Escalates, Strait of Hormuz Threatened

Crude oil prices are expected to jump when trading opens Sunday evening, as market participants fear the conflict between the U.S. And Iran will escalate and lead to a major supply disruption. The U.S. And Israel launched strikes against Iran on Saturday, resulting in the death of Supreme Leader Ayatollah Ali Khamenei and other top leaders .

Market Reaction and Forecasts

Kalshi prediction markets currently indicate a 79% likelihood that U.S. Crude oil will reach at least $73 per barrel. U.S. Crude closed at $67.02 per barrel on Friday, already up 17% this year in anticipation of potential Iranian retaliation . Brent crude oil, the international benchmark, closed Friday at $73.21 a barrel, up 20% year-to-date.

Analysts predict significant price increases when trading resumes. Rystad Energy forecasts a potential $20 spike in Brent crude futures, noting that tanker traffic through the Strait of Hormuz has effectively halted as shipping companies take precautionary measures . Kpler reports that more than 14 million barrels per day passed through the Strait in 2025, representing about a third of the world’s total seaborne crude exports, with three-quarters of those exports destined for China, India, Japan, and South Korea .

Other analysts offer more conservative estimates, suggesting a rise of at least $3 to $5 per barrel. Barclays predicts Brent could hit $100 per barrel, emphasizing the potential impact on oil markets .

Strait of Hormuz: A Critical Chokepoint

The Strait of Hormuz, linking the Gulf to the Indian Ocean, is a strategically vital chokepoint for global oil shipments. Located between Iran and Oman, its narrowness (around 50 kilometers) and shallow waters make it vulnerable to disruption . Iran has repeatedly threatened to close the strait during times of crisis, and a senior naval commander again threatened its closure in late January . Whereas Tehran has not yet acted on these threats, it briefly closed part of the strait during recent military drills .

Potential for De-escalation?

President Donald Trump stated Sunday that Iran has expressed a willingness to negotiate and that he has agreed to talks, potentially opening a path to de-escalation . However, he also indicated that U.S. Military operations in Iran are “ahead of schedule” .

Tanker Incident Near Hormuz

A Palau-flagged chemicals and oil products tanker, the Skylight, was struck near the Strait of Hormuz, highlighting the risks to commercial shipping. All 20 crew members were evacuated, and four sustained injuries . The Skylight has previously been listed in U.S. Sanctions related to Iran-related oil trade .