Tankers are seen at the Khor Fakkan Container Terminal, the only natural deep-sea port in the region and one of the major container ports in the Sharjah Emirate, along the Strait of Hormuz, a waterway through which one-fifth of global oil output passes on June 23, 2025.
Giuseppe Cacace | AFP | Getty Images
Oil markets are bracing for a possible supply shock after U.S. strikes on Iran over the weekend reignited fears that flows through the Strait of Hormuz could be disrupted.
While analysts expect an immediate “knee-jerk” reaction to oil prices when trading resumes in New York on Sunday evening, the bigger question is whether tensions could escalate into a sustained interruption of Gulf exports.
“At this point, it seems we are looking at a full-scale military conflict between the U.S. and Iran, which would be unprecedented and the trajectory impossible to assess,” said Vandana Hari, CEO of energy research firm Vanda Insights.
“If it carries on for days with Iran and its proxies retaliating to the fullest extent, we are looking at the worst-case scenarios for oil, including a major disruption of oil flows through the Middle East,” Hari told CNBC. This is unless the U.S. is able to pre-emptively disarm the Iranian navy and military, as well as ensure tanker traffic through the Strait of Hormuz continues to flow normally.
With tensions escalating, attention has shifted back to the Strait of Hormuz, where any disruption would have immediate and outsized consequences for global oil and LNG flows.
Oil prices year-on-year
Positioned between Oman and Iran, the strait serves as a critical transit route – and potential chokepoint – for global crude, with about 13 million barrels per day moving through it in 2025, equal to approximately 31% of all seaborne oil flows, Kpler data showed.
It links major Gulf producers including Saudi Arabia, Iran, Iraq and the United Arab Emirates to the Gulf of Oman and the Arabian Sea.
Reuters reported on Saturday that an official with the European Union’s naval mission, Aspides, said commercial vessels had received VHF radio messages from Iran’s Revolutionary Guards warning that “no ship is allowed to pass the Strait of Hormuz.”
The official was quoted as saying that Tehran had not formally confirmed any directive to close the waterway.
Early indications are of a broader scale attack on Iran, with counterattacks which could escalate to draw in multiple Gulf countries.
Reuters noted that Iran has repeatedly threatened over the years to block the narrow passage in response to attacks against the Islamic Republic.
Iran has in the past repeatedly threatened to block the narrow passage in response to attacks against the Islamic Republic.
Bob McNally, president of Rapidan Energy Group, who had advised clients for weeks that conflict was a 75% probability, called it “a very serious development” for the world’s oil and gas markets given their dependence on Hormuz production and flows.
The larger question is duration, industry veterans emphasized. The extent of any oil and LNG price spike will depend on the duration and scope of any disruptions to Gulf production and flows, McNally said.
The worst-case scenario?: Triple digit oil
Analysts say the potential scenarios range from limited disruptions to Iranian exports to a full blockade of Hormuz.
The nightmare for global markets is not just lost Iranian barrels, but a broader disruption to shipping through the strait.
“Early indications are of a broader scale attack on Iran, with counterattacks which could escalate to draw in multiple Gulf countries,” said Saul Kavonic, head of energy research at MST Marquee.
Kavonic said markets will initially price in a spectrum of risks — from the loss of up to 2 million barrels per day of Iranian exports to attacks on regional infrastructure or, in the extreme, a disruption of passage through Hormuz.
“If the Iranian regime feels they face an existential threat, attempts to block the Strait of Hormuz cannot be ruled out,” he said, though he added that the U.S. and its allies would likely deploy military escorts to protect shipping lanes.
An infographic titled “Strait of Hormuz” created in Ankara, Turkiye on June 17, 2025.
Anadolu | Anadolu | Getty Images
Should Iran succeed in closing the Strait, the implications for the global oil markets could be severe.
“This could present a scenario three times the severity of the Arab oil embargo and Iranian revolution in the 1970s, and drive oil prices into the triple digits, while LNG prices retest the record highs of 2022,” Kavonic noted.
Brent crude settled at $72.48 on Friday, bringing its year-to-date gain to about 19%. U.S. West Texas Intermediate (WTI) closed at $62.02, up roughly 16% so far this year.
Andy Lipow, president of Lipow Oil Associates, said the attacks will significantly heighten the risk of an oil supply disruption in the region, even though Iranian oil facilities have not been directly targeted so far.
Lipow described the worst-case outcome as “an attack on Saudi oil infrastructure followed by a complete closure of the Strait of Hormuz.” He estimates the probability of that scenario at about 33%, given Iran may feel cornered.
