Hormuz Strait Disruption Pushes Oil Above $100, Raises Europe Energy Risks

Energy Markets Swing as Hormuz Strait Disruption Triggers Price Volatility

Since February 28, escalating conflict involving the United States, Israel and Iran has disrupted transportation through the Strait of Hormuz — one of the world's most critical energy chokepoints. The route carries roughly one-fifth of global oil shipments and about 20% of global liquefied natural gas (LNG) trade, meaning prolonged disruption could have widespread consequences for global energy markets.

Market analysts say that because oil and gas markets are highly globalized, Europe could face significant knock-on effects. While the scale of impact will largely depend on how long the conflict lasts, the region's natural gas market may experience tightening supply pressure in the medium term.

Oil and Gas Prices Surge Then Reverse Amid Geopolitical Uncertainty

Escalating tensions in the Middle East pushed oil prices sharply higher on March 9, with crude rising above the psychological threshold of $100 per barrel for the first time since 2022. Prices briefly exceeded $119 per barrel.

Just a week earlier, oil had been trading near $70 per barrel. The nearly 70% surge in such a short time frame marked an unprecedented swing in market conditions. Even in early March 2022, when the Russia–Ukraine conflict drove prices to $130.50 per barrel, market volatility was not as intense.

Natural gas markets also reacted strongly. Europe's benchmark Dutch TTF gas price closed 13.49% higher on March 9 at €60.58 per megawatt-hour after surging as much as 30% earlier in the session. Despite the increase, prices remained well below levels seen during the 2022 energy crisis.

According to the head of research at trading brokerage XTB, the spike followed reports that new attacks over the weekend targeted key energy infrastructure in the Gulf region, forcing further shutdowns of oil and gas production facilities.

However, market sentiment shifted dramatically later the same day. In an interview with CBS, U.S. President Donald Trump unexpectedly suggested that the conflict involving the United States, Israel and Iran was nearing its end. He also indicated that some oil-related sanctions could be lifted to help ease energy prices.

Following the remarks, market expectations quickly reversed.

By early March 10, oil prices had fallen sharply. Around 6:30 a.m. GMT, West Texas Intermediate crude dropped 5.88% to $89.21 per barrel, while Brent crude fell 5.60% to $93.42 per barrel after briefly plunging nearly 10% at the market open. European gas prices also declined, with Dutch TTF futures dropping 13.66% to €48.74 per megawatt-hour.

A chief market strategist at U.S.-based B. Riley Wealth told French media that the president's comments had 'changed the game', noting that the administration must now balance the cost of war with market stability.

Analysts from Australian brokerage Pepperstone added that attention had also focused on the March 9 meeting of Group of Seven (G7) finance ministers. Trump's subsequent remarks about the potential end of the conflict boosted hopes that supply chains and logistics could soon normalize.

During the meeting, G7 finance ministers held a video conference with the International Energy Agency (IEA) to discuss the possible coordinated release of strategic oil reserves if necessary to stabilize markets. No decision has yet been made, although reports suggest three G7 members, including the United States, expressed support for tapping emergency reserves.

The IEA manages around 1.2 billion barrels of strategic petroleum reserves as part of its energy security system. U.S. officials reportedly suggested a coordinated release of 300 million to 400 million barrels — about 25% to 35% of total reserves.

Still, analysts warn that if military operations continue, energy prices could quickly rebound. The head of energy research at DBS Bank noted that Trump's comments helped calm markets, but added that the market may have overreacted both to the earlier price surge and to the subsequent decline.

He also pointed out that crude grades such as Murban and Dubai remained well above $100 per barrel, suggesting that the underlying supply situation had not materially changed.

Saudi Aramco, one of the world's largest oil exporters, warned on March 10 that prolonged disruption to shipping through the Strait of Hormuz could have 'catastrophic consequences' for global oil markets.

JPMorgan said in a report that as much as 12 million barrels per day of oil supply could be lost over the next two weeks. Without secure transit through the Strait of Hormuz, policy interventions may have limited impact on stabilizing prices.

Analysts at ING echoed that view, stating that oil prices are unlikely to maintain their downward trend unless shipments through the strait resume.

Prolonged Trade Disruptions Could Tighten Europe's Energy Market

According to a new analysis by the Brussels-based think tank Bruegel, a short conflict would mainly result in a geopolitical risk premium in energy prices. However, if hostilities continue for several weeks, inventories could be depleted, logistics disrupted and global oil and gas supply balances tightened — resulting in more sustained price increases.

Some analysts remain relatively optimistic about the outlook. Deutsche Bank analysts said in a report to clients that investors still appear to view the conflict as temporary rather than a prolonged geopolitical crisis. Energy futures curves show that price volatility is concentrated in near-term contracts, while longer-term prices have moved much less.

Oxford Economics also believes the oil market has enough supply flexibility to absorb disruptions related to Iran. The firm's head of energy forecasting said Iran is unlikely to cause severe and prolonged production outages, making a full-scale oil crisis unlikely.

However, the greater risk lies in transport disruptions rather than production losses. While Saudi Arabia and the United Arab Emirates possess spare capacity that could offset Iranian supply losses, alternative shipping routes could only handle about one-third of the normal volume that passes through the Strait of Hormuz.

Other experts are less optimistic. Economists at French research institute Rexecode warned that even if tensions ease quickly, oil prices are unlikely to fall as rapidly as they rose. Higher energy costs tend to pass through supply chains, raising production costs and consumer prices, which could weaken corporate margins and reduce household purchasing power.

Bruegel also highlighted Europe's vulnerability in the LNG market. While the region relies less on Gulf oil and gas than Asia-Pacific economies, it would still be affected by disruptions.

If LNG shipments through the Strait of Hormuz remain restricted, global spot supply could tighten rapidly, forcing Europe to compete with Asian buyers for flexible cargoes. A similar situation occurred during the energy crisis between 2021 and 2023.

This risk is particularly concerning because Europe's gas storage levels are currently lower than in previous years. By the end of February 2026, European gas inventories stood at about 46 billion cubic meters, compared with 60 billion cubic meters in 2025 and 77 billion cubic meters in 2024.

A professor at Sciences Po in Paris noted that during the early stages of the Russia–Ukraine conflict, strong European demand contributed to gas shortages in countries such as Bangladesh, Pakistan and Vietnam. He warned that current storage levels are comparable to March 2022 and that Europe has made little progress in preparing for similar disruptions.

'If there is no backup plan, even a minor disruption could send prices soaring,' he said.

Goldman Sachs estimates that if LNG flows through the Strait of Hormuz are disrupted for one month, European gas prices could rise 130% to €73 per megawatt-hour. Experts at IFP Energies Nouvelles say that if supply interruptions last more than two months, prices could exceed €100 per megawatt-hour — approaching levels seen during the 2022 energy crisis.

Bruegel analysts also warn that delays in oil and gas shipments could disrupt Europe's efforts to refill storage facilities ahead of winter, raising industrial energy costs. Higher gas prices would likely push up electricity prices and squeeze profit margins, particularly for energy-intensive industries.

If both oil and gas prices surge simultaneously, switching to alternative energy sources would become more difficult, potentially increasing coal demand and forcing stronger energy-saving measures on the demand side.

As a result, analysts suggest European policymakers should begin preparing contingency plans to ensure supply security, including monitoring global cargo flows, implementing demand-reduction measures and accelerating storage refilling.

Rising Energy Prices Could Weigh on the Global Economy

The geopolitical crisis could also affect the broader global economy.

According to estimates from the International Monetary Fund (IMF), if oil prices increase by 10% for most of a year, global inflation would rise by about 0.4 percentage points while economic growth would decline by 0.2 percentage points.

Economists at Natixis estimate that every €10 increase in Brent crude prices could raise France's inflation rate by 0.4 percentage points. About 0.25 percentage points would come directly from energy costs, while another 0.15 percentage points would result from higher intermediate consumption.

Capital Economics' chief economist said economies in Asia, the eurozone and the United Kingdom are more vulnerable to energy shocks than the United States.

Meanwhile, shipping company Norden's CEO Jan Rindbo said customers are already becoming cautious, with some delaying large purchases of raw materials while waiting to see how the geopolitical situation develops.