US and Israel Attack Iran, Drive Oil to $200 per barrel, Roiling Global Markets

The conflict between the United States, Israel, and Iran has rapidly escalated into a major geopolitical crisis with profound implications for global energy markets.

“Shortly after the United States and Israel first attacked Iran on February 28, analysts warned that war could drive oil prices above $100 a barrel”

Al Jazeera

Following initial attacks by the US and Israel on Iranian military targets on February 28, analysts immediately warned that the conflict could drive oil prices above $100 per barrel.

Al Jazeera

The situation deteriorated significantly when President Trump ordered strikes on Kharg Island, Iran's primary oil export terminal, which handles most of the country's petroleum exports.

This military action stoked widespread fears of supply disruptions in global markets, triggering a rapid upward trajectory in crude oil prices that has continued to escalate as tensions mount and Iranian retaliation targets energy infrastructure across the region.

Oil prices have surged dramatically since the conflict began, with Brent crude hitting nearly $120 on March 9 and remaining above the $100 threshold since March 13.

The situation worsened dramatically on March 18 when an Israeli strike on Iran's South Pars gasfield prompted Iranian counterattacks on oil and gas facilities in Qatar, Saudi Arabia, and the United Arab Emirates, pushing crude prices above $108 per barrel.

Mint

Market analysts now seriously consider the possibility of prices surpassing $150 or even $200 per barrel, with benchmark Middle Eastern crudes like Oman and Dubai already crossing the $150 threshold.

The trajectory depends heavily on how long the Strait of Hormuz remains closed, as this critical waterway handles approximately one-fifth of global oil supplies during peacetime.

The scale of potential supply disruption from this conflict is unprecedented and represents a major threat to global energy security.

“Shortly after the United States and Israel first attacked Iran on February 28, analysts warned that war could drive oil prices above $100 a barrel”

Al Jazeera

Gulf countries collectively produce 20 million barrels per day of liquid fuels, with 15 million barrels of exports removed from the global market - a loss that the industry has never previously experienced.

The Strait of Hormuz closure could create a supply gap of approximately 15 million barrels per day, representing about 15% of global demand.

This massive shortfall is significantly larger than the disruptions seen during the 2022 Russia-Ukraine crisis, and analysts warn that even strategic petroleum reserves - equivalent to 90 days of imports for IEA member countries - cannot fully offset such a substantial supply loss.

Unlike previous conflicts, the current situation involves real, physical supply volumes being taken offline rather than just market speculation about potential disruptions.

For oil-importing nations like India, the potential spike to $200 per barrel represents an existential economic threat.

India imports nearly 90% of its crude requirements, with a large portion sourced from the Middle East, making the country highly vulnerable to supply shocks and price volatility.

Mint

Strategic reserves, including refinery inventories, cover only 70-75 days of consumption, offering minimal protection against prolonged disruptions.

A sustained $200 oil price would trigger severe inflationary pressures globally while fundamentally reshaping investor sentiment, central bank policies, and capital flows.

The impact would extend far beyond fuel inflation to create wider current account deficit risks, potentially straining foreign exchange reserves and weakening the rupee.

This currency depreciation would further increase import costs for sectors like paints, tires, and chemicals, putting significant pressure on profit margins and potentially triggering a structural revaluation of the Indian economy.

Market experts are increasingly confident that oil prices could reach the $200 per barrel threshold, with several factors driving this pessimistic outlook.

“Shortly after the United States and Israel first attacked Iran on February 28, analysts warned that war could drive oil prices above $100 a barrel”

Al Jazeera

Unlike the 2022 Russia/Ukraine crisis where prices reached $150 in inflation-adjusted terms, the current situation involves 'dimensionally bigger—and real' supply volumes at risk, according to Wood Mackenzie analysts.

Al Jazeera

The consultancy explicitly states that 'US$200/bbl is not outside the realms of possibility in 2026' given the unprecedented scale of supply disruption.

Market analysts predict that Brent crude will need to push at least to $150 in the coming weeks to balance the market as global demand of 105 million barrels per day still needs to fall.

The extent of price escalation depends critically on three key factors: the duration of the conflict, how long the Strait of Hormuz remains closed, and whether the US Navy can successfully escort shipping vessels through the dangerous waters.

The long-term recovery from this crisis faces significant challenges, even after the conflict ends.

Wood Mackenzie analysts warn that 'cranking up the supply chain won't be swift,' noting that while stored product barrels might be moved relatively quickly, restarting production from shut-in wells could take weeks or even longer.

This extended recovery period suggests that oil prices could remain elevated for an extended time even after hostilities cease.

The market disruption is also triggering significant shifts in investment patterns, with precious metals like gold and silver expected to benefit from the heightened geopolitical risk and inflationary pressures.

Analysts predict gold could rally 15-25% from current levels, potentially testing $5,800-$6,500, while silver could surge 25-40%, moving towards $110-$130.

However, these gains may be capped if central banks respond with rate hikes, though the upside could remain significantly higher if real rates remain suppressed.

The overall impact on financial markets could be profound, potentially triggering not just market corrections but structural revaluations of entire economies.