Will Iran conflict send oil prices above $100 a barrel?

DW News · Mar 1, 2026 · Collected from RSS

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The US-Israel attack on Iran and Iran's aggressive response have unnerved oil markets, with many analysts predicting a massive rise in oil prices. While Iran is responsible for just 3-4% of global oil output, its proximity to the Strait of Hormuz, considered the most critical oil chokepoint in the world, is prompting oil analysts to raise their forecasts for future oil prices. A prolonged disruption to traffic in the strait, through which a fifth of the world's oil production is transported, could see oil prices breach the $100-a-barrel threshold, a prospect that would hurt the global economy and push up prices that are already proving difficult to rein in. Oil prices had already risen to their highest levels in months ahead of the latest war in the oil-rich region as traders worried about the consequences of potential military strikes on Iran. Brent crude rose to around $73 a barrel on February 27. The OPEC+ group of oil-producing countries agreed on Sunday to boost production from April, in an effort to calm markets. "If the conflict is prolonged and, in particular, if it affects actual oil supply, due to disruptions to Iranian supply or to Iranian attempts to block the Strait of Hormuz, it could cause oil prices to jump, perhaps to around $100 per barrel," William Jackson, chief emerging markets economist at Capital Economics, said in a note to clients.Iranians cheer, mourn Khamenei's deathTo view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video How much oil does Iran produce? Iran produces about 3.3 million barrels of oil per day (bpd), making it the fourth-largest oil producer in OPEC. It is also one of the largest natural gas producers in the world. The country also has some of the world's largest oil reserves, accounting for about a quarter of oil reserves in the Middle East and 12% in the world, according to the US Energy Information Administration (EIA). But its production has remained limited because of years of underinvestment and international sanctions. Iran has found ways to bypass Western sanctions and now sells 90% of its exported oil to China. In fact, thanks to demand from China, Iran increased its crude oil output by around 1 million bpd from 2020 to 2023. Iran's economy is relatively diversified compared with many other oil-reliant Middle Eastern economies, but energy exports form a significant source of government revenue. In 2023, Iran's oil companies earned about $53 billion in net oil export revenues, according to EIA estimates. Why is the Strait of Hormuz in focus? The Strait of Hormuz is a major oil shipping route that connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. It lies between Iran and Oman. Large volumes of crude oil produced in the region by countries such as Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq, and consumed globally, flow through the strait. Iran has repeatedly threatened to close the strait. But Tehran has never followed through on this, as that would risk provoking a rapid international response that could prevent it from shipping its own oil abroad. Amid the ongoing war, traffic through the Strait of Hormuz has effectively come to a halt, as several oil shippers and traders have suspended energy shipments through the waterway due to safety concerns and warnings from the authorities. That threatens to prevent 15 million bpd of crude oil — about 30% of global seaborne crude trade — from reaching the markets. Even if alternative infrastructure is used to bypass the strait's flows, the impact would be a loss of 8-10 million bpd of crude oil supply, according to Rystad Energy. "Whether the Strait is closed by force or rendered inaccessible by risk avoidance, the impact on flows is largely the same," Jorge Leon, senior vice president and head of geopolitical analysis at Rystad Energy, wrote in a note to clients. "Unless de-escalation signals emerge swiftly, we expect a significant upward repricing of oil at the start of the week."Iran has successfully found a way to bypass Western sanctions and sell its oil to buyers in AsiaImage: Indonesian Maritime Security Agency/AP Photo/picture alliance How has OPEC+ responded? OPEC+ — an alliance between the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and a handful of other oil producers including Russia — announced a greater-than-expected increase to production quotas on Sunday. "The group ultimately raised output beyond that initial expectation but stopped short of a more forceful increase, underscoring the tightrope it is walking between responding to near-term geopolitical risk and avoiding oversupply later this year," Leon said. "If flows through the Gulf are constrained, additional production will provide limited immediate relief, making access to export routes far more important than headline output targets." Saudi Arabia has increased its own crude exports in recent weeks, which analysts saw as an effort to create a short-term buffer ahead of the US and Israeli strikes. Saudi Arabia shipped about 7.3 million bpd in the first 24 days of February, the highest since April 2023, according to tanker-tracking data compiled by Bloomberg. Saudi Arabia also lifted oil exports in June last year, just as the US attacked Iranian nuclear sites. Iran also boosted its oil exports in the run-up to the negotiations with the US, Bloomberg reported. "Even so, such buffers are inherently finite and designed to smooth short-term shocks rather than offset sustained structural disruptions," the Rystad Energy expert said.How would higher oil prices impact the global economy? The impact on the global economy would depend largely on how high oil prices go from here. Crude oil is a major economic unit, so a rise in oil prices drives up the prices of other goods. "As a rule of thumb, a 5% year-on-year rise in oil prices usually adds about 0.1 of a percentage point to average inflation in major economies," Jackson said. "So a rise in Brent [primary global benchmark for oil prices] to $100 per barrel could add 0.6-0.7 percentage points to global inflation." Higher inflation could weigh down on overall consumer confidence and spending. Central banks may also raise interest rates to tame inflation, further slowing economic growth. Edited by Ben Knight