Oil prices rocketed 7% on Friday, marking their sharpest single-day gain since the Ukraine war, as Israel and Iran’s exchange of airstrikes ignited fears of Middle East supply disruptions. Brent crude settled at $74.23 after briefly spiking 13% to $78.50, while U.S. WTI crude hit $77.62—both benchmarks posting double-digit weekly gains. The volatility reflects trader panic over potential attacks on key oil infrastructure, particularly Iran’s Kharg Island terminal (source of 90% of its exports) or a closure of the Strait of Hormuz, a chokepoint for 20% of global oil shipments.
Analysts warn the conflict could escalate into tit-for-tat strikes on oil facilities. While Iran’s refineries remain unharmed so far, any disruption to its 3.3M barrels/day output—or neighboring producers like Iraq and Saudi Arabia—could cripple supplies. OPEC+ has spare capacity to offset some losses, but prolonged fighting may overwhelm it. “The market is pricing in worst-case scenarios,” said a Rabobank analyst, noting the Strait’s vulnerability. Meanwhile, U.S. rig counts fell for a 7th week, tightening supply further.
Global stocks tumbled as risk aversion spiked, with the Dow shedding 1.8% and the Nasdaq down 1.3%. Investors flocked to gold, the dollar, and Swiss franc, while CFTC data showed speculators boosted bullish oil bets. President Trump urged Iran to negotiate, but Tehran vowed more strikes, leaving markets on edge. JP Morgan cautioned that blocking Hormuz would backfire on Iran, alienating key buyer China and strangling its own economy.
With Israel promising a “prolonged operation” and Iran threatening harsh responses, oil markets face extended turbulence. If attacks shift to energy assets, prices could skyrocket past $80/barrel, worsening global inflation. All eyes are on diplomatic efforts—but for now, traders are bracing for more volatility ahead.