With President Trump threatening military action against Iran within days, the global oil market faces significant risks. What might otherwise be routine geopolitical tension is now evolving into a high-stakes standoff that could ripple across energy markets, financial systems, and household budgets worldwide.
A direct military conflict between the United States and Iran would represent one of the most serious threats to global oil supplies in recent years. In the most severe scenario, analysts warn that crude prices could surge sharply, fueling inflation and potentially tipping major economies toward recession.
Military Buildup Raises Market Anxiety
As U.S. forces expand their presence in the Middle East, President Donald Trump indicated this week that he expects to make a decision within the next 10 days on whether to authorize military strikes against Iran. The statement alone was enough to rattle traders already wary of instability in the region.
Energy investors are particularly sensitive to any signals suggesting escalation. John Kilduff, founder of Again Capital, described the situation as persistently unsettling for markets, noting that traders are pricing in the possibility that Iran could retaliate in unpredictable ways.
Although Trump has warned Tehran that any future strike would be far more severe than last year’s limited U.S. airstrikes on nuclear-related facilities, he has also left the door open for diplomatic negotiations over Iran’s nuclear program. That dual-track messaging—threats combined with potential talks—has only heightened uncertainty.
Pricing in the Risk
Oil prices have climbed more than 5% this week alone, reflecting growing concerns that military action could disrupt critical supply routes. The focal point of those fears is the Strait of Hormuz, one of the most strategically vital waterways in the world.
On average, more than 14 million barrels of oil and condensates pass through the narrow strait every day—roughly one-third of all global seaborne oil exports. The majority of that oil is bound for Asian powerhouses such as China, India, Japan, and South Korea.
Even temporary interruptions can cause price spikes. Earlier this week, Iran’s Islamic Revolutionary Guard Corps partially restricted traffic in the strait during military exercises. Iranian officials have signaled that a full closure remains an option if ordered by leadership.
Energy strategist Bob McNally, founder of Rapidan Energy and a former White House adviser under George W. Bush, cautioned that markets may be underestimating Iran’s ability to sustain disruption in the waterway. Unlike non-state actors such as Yemen’s Houthi militants, Iran possesses advanced missile systems, naval mines, and extensive coastline infrastructure.
Worst-Case Scenario: Oil Above $100
A prolonged shutdown of the Strait of Hormuz would have dramatic consequences. Insurers such as Lloyd’s of London could refuse coverage for tankers navigating the area, effectively halting commercial shipments even if vessels were technically able to pass.
Without the oil flowing through Hormuz, global supply and demand would quickly fall out of balance. Analysts suggest prices could surge above $100 per barrel in a sustained disruption. That would likely dampen consumer demand, slow economic growth, and potentially trigger a broader downturn—especially if inflation pressures return.
Some experts argue that Iran could view economic disruption as strategic leverage, particularly ahead of key U.S. political milestones. The timing of any escalation could carry not just military consequences, but electoral implications as well.
Rystad Energy estimates that a broader conflict could push crude prices $10 to $15 higher almost immediately. Even more modest disruptions—such as a sustained loss of 1 million barrels per day of Iranian exports—could add around $8 per barrel, according to research from Goldman Sachs.
Limited Strikes vs. Regional War
Still, not all analysts believe full-scale war is inevitable. The U.S. has multiple options short of all-out regional conflict, including targeted strikes or maritime blockades.
Strategists at JPMorgan suggest that any U.S. action would likely be carefully calibrated to avoid directly targeting Iran’s oil production or export infrastructure. Under that scenario, crude prices might initially jump but could later stabilize if global supply fundamentals remain relatively soft.
Goldman Sachs echoes that base-case outlook, arguing that while temporary volatility is likely, a long-term supply shock is not guaranteed.
Meanwhile, U.S. Energy Secretary Chris Wright recently expressed confidence that global oil supplies are currently robust, suggesting the administration has some flexibility in managing geopolitical risk without triggering runaway energy prices.
A Market Watching Every Move
For now, the oil market remains in wait-and-see mode. Traders are scrutinizing military movements, diplomatic signals, and statements from both Washington and Tehran.
But one thing is clear: With President Trump threatening military action against Iran within days, the global oil market faces significant risks. Whether those risks materialize into a sustained crisis—or fade through diplomacy—will depend on decisions made in the coming days.
