Oil prices haven’t had a breather since the year started as one geopolitical crisis has moved to another. Just a week after the U.S. intervention in Venezuela captured Nicolas Maduro, U.S. President Donald Trump has turned his sights to Iran, threatening a U.S. response to the deadly suppression of mass protests against the Islamic Republic’s regime.

Oil settled on Monday at a one-month high amid concerns about a potential supply disruption in the Middle East if Iranian protests further escalate and a U.S. intervention of some kind draws a response from Iran.

Brent Crude prices hit $64 per barrel for the first time this high in 2026. The U.S. benchmark, WTI Crude, topped $59 a barrel and moved in early Asian trade on Tuesday very close to $60, which is considered the safe breakeven for most U.S. shale producers.

Prices could move further up as protests in Iran escalate and the U.S. President signals he could be weighing a response to the killings of hundreds of protesters by the Iranian regime.  

Concerns about Strait of Hormuz Closure Return

The ongoing unrest raises the possibility of oil supply disruptions in the Middle East. The ‘mother of all disruptions’, an Iranian attempt to close the Strait of Hormuz, the world’s most critical oil transit chokepoint, is also back on traders’ minds, although it is not the base-case scenario of any forecaster or investment bank.

The closure of the Strait of Hormuz is the oil market’s biggest fear. It could cause double-digit-dollar hikes in oil prices as the narrow lane between Iran and Oman is the key export route of all major oil producers in the Gulf, and very few alternatives exist to move oil out of the strait if it is closed.

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The strait is the main export route of Middle Eastern oil to Asia and the key artery of exports of all major producers in the region, including Iran itself.

But only Saudi Arabia and the United Arab Emirates (UAE) have operating pipelines that can circumvent the Strait of Hormuz. Iran has the Goreh-Jask pipeline and the Jask export terminal on the Gulf of Oman to avoid the Strait of Hormuz, but it hasn’t used this route much over the past years, EIA data show.

In 2024, oil flow through the strait averaged 20 million barrels per day (bpd), or the equivalent of about 20% of global petroleum liquids consumption, the EIA estimates.

If the worst comes to the worst, the impact will be high—not only on oil prices, but on natural gas markets, too, because Qatar’s massive LNG exports are also passing through the lane.  

The Strait of Hormuz has never been closed. This goes to show that Iran hasn’t followed through on any of its threats throughout the years. But it also signals that the market has never seen a disruption on such a massive scale, and the price response could only be guesstimated.

“The fear of a closure will cause the price of oil to rise a few dollars per barrel, but it is the complete closure of the Strait that can result in a $10 to $20 per barrel spike,” Andy Lipow, president of Lipow Oil Associates, told CNBC earlier this week.

Iran Scenarios

To be sure, analysts think a complete closure of the Strait would be near-impossible, due to the U.S. naval presence in the region. Some see a high probability of limited U.S. strikes on Iran, probably similar to the June 2025 hits on the Iranian nuclear sites.

Earlier this week, President Trump said Iran wants to negotiate, while Iranian Parliament Speaker Mohammad Baqer Qalibaf, a former commander of the Revolutionary Guard in Iran, an elite military force, warned the U.S., 

“Let us be clear: in the case of an attack on Iran, the occupied territories (Israel) as well as all U.S. bases and ships will be our legitimate target.”

Late on Monday, President Trump deployed his favorite tool in diplomacy in his second term in office, saying that “Effective immediately, any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America.”

China, Russia, the United Arab Emirates, Turkey, and Brazil are major economies doing business with Iran. China, in particular, imports nearly all of Iran’s oil exports, at discounts, and could be heavily affected by the new tariff, just as the U.S. and China are in a trade truce.

The President has been briefed on a range of military and covert tools that the U.S. could potentially use against Iran, two anonymous Defense Department officials told CBS News late on Monday. Some of these options go well beyond limited airstrikes and could include cyber operations and psychological campaigns to disrupt Iranian command structures, communications, and state-run media, the officials added.

It is uncertain if the U.S. would intervene. It’s also unclear how desperate the Iranian rulers are and if they would attempt to disrupt oil supply in the Middle East with attacks on regional infrastructure or posturing in the Strait of Hormuz, while cracking down on protests with even more brutal force.

At any event, the oil market isn’t pricing in ‘the mother of all disruptions’, and it likely shouldn’t.

By Tsvetana Paraskova for Oilprice.com

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