Oil futures soared in the first trade since the United States and Israel launched attacks against Iran over the weekend.
U.S. crude oil rose about $5, or 8%, to about $72 a barrel as futures trading began Sunday evening. Brent crude oil, the international benchmark, initially rose more than 12% to around $82 a barrel, but fell to just under $80 a few minutes into trading. Brent settled at just over $73 per barrel on Friday.
Meanwhile, stock futures prices fell. Futures for the S&P 500, Nasdaq, and Dow all fell about 1%. But futures for Exxon, Chevron and many other oil companies each rose about 2%. Defense stocks such as Northrop Grumman and Lockheed Martin rose modestly.
Initial movements in oil futures were sharper than typical crude oil trading, but were largely telegraphed and within analysts’ expectations for a shaky but not overly concerned market. Oil prices were already rising in anticipation of an attack on Iran.
Traders expect the current disruption in the oil market due to the strike to be relatively short-lived. But there remains great uncertainty about the scope and duration of the war, with President Donald Trump suggesting it could begin within weeks.
Industry analysts have warned that large-scale riots, chaotic power vacuums, strikes that disrupt oil production, or prolonged closures of key oil shipping routes could ultimately push oil prices to $100 a barrel or more.
If that happens, and the market is currently betting on that scenario, gas prices could shoot through the roof. That could force Americans to pay the price of regime change in Iran, further heightening affordability concerns.
As military conflict continues, here’s what you need to know about the oil market.
Iran plays a vital role in the global oil market. The company is a major oil producer, controlling important transportation routes for crude oil and exporting it to oil-hungry countries such as China. The country also boasts the world’s third-largest proven oil reserves, according to OPEC.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies announced early Sunday that they would increase output by 206,000 barrels per day, after suspending production increases at the beginning of the year. OPEC increased production by 137,000 barrels per day in the fourth quarter.
The increase in production may have slowed the rise in oil prices somewhat, but energy analysts did not expect the production increase to have a major effect on suppressing prices.
The Strait of Hormuz is a narrow waterway off Iran’s southern coast that is a major shipping route for crude oil from oil-producing countries such as Saudi Arabia and Kuwait to the rest of the world. Iran controls the northern part of the strait. About 20 million barrels of oil, or about one-fifth of daily global production, flow through the strait each day, according to the U.S. Energy Information Administration, which calls it a “key oil chokepoint.”
Iran has threatened to close vital waterways in previous conflicts with the United States and other Western countries. During the 12-day conflict between Iran and Israel last year, Goldman Sachs estimated that oil prices could exceed $100 per barrel if there was “prolonged disruption” in the Strait.
Bob McNally, president of Rapidan Energy Group, told CNN that closing the Strait of Hormuz would create an energy crisis.
But an even bigger concern would be if Saudi Arabia’s oil production facilities were attacked and shut down for an extended period of time. McNally points out that the oil plant in Abqaiq, Saudi Arabia, that was attacked in 2019 had specialized equipment that “you can’t just order from General Electric.”
If the Strait of Hormuz were to close, Asian economies, including China and India, would be particularly hard hit.
Their scramble to secure oil from other countries could drive up global prices. Even a more benign scenario in which only Iranian oil shipments are affected would have ripple effects around the world.
“Oil is a global substitute commodity, so any disruption anywhere will affect prices everywhere,” said Clayton Seagle, a senior fellow at the Center for Strategic and International Relations, a Washington, D.C.-based think tank. research notes.
“If Iranian barrels are lost, China will bid for alternative supplies,” Seigl said.
Experts say a military conflict with Iran, the world’s sixth-largest oil producer, would mean higher oil prices, higher gasoline prices and overall inflation.
Tom Kloza, a veteran oil analyst and Gulf Oil Co. adviser, said the impact of the war with Iran could cause wholesale gasoline futures prices to rise by 25 cents immediately, and could rise by 5 to 10 cents a day for some time.
“There’s definitely a whiff of panic in the air. They’re afraid they’re going to see a big price increase,” Kloza said. “It’s just a question of where to stop. Before Friday night, I would have said stop at $3.25. Now, in a way, it’s a little bit open-ended.”
Gasoline prices nationwide averaged $2.98, up slightly from the lowest level since 2021, after falling below $3 for the first time in four years in December, according to the American Automobile Association. The Trump administration has repeatedly celebrated falling gas prices, which are threatening to collapse due to the Iran conflict.
When Israel attacked Iran last June, Brent crude oil recorded its biggest single-day rise since March 2022. Prices rose further after the United States became involved in a brief conflict, but plummeted when a cease-fire was announced.