The trading floors haven't even opened yet, and the carnage is already priced in. Following the joint US-Israeli strike on Iran and Tehran's unprecedented retaliatory barrage against American bases across the Gulf, global energy markets are bracing for what analysts describe as the most significant supply disruption since the 1973 oil embargo.
The math is brutally simple. Roughly 13 million barrels of crude oil transit the Strait of Hormuz every day — 31 percent of all seaborne crude globally. Iran has already demonstrated its ability to close the strait during its February 16 "Smart Control" military exercise. If Tehran weaponizes that chokepoint in response to the ongoing bombardment, the global economy enters uncharted territory.
The Monday Morning Reckoning
Markets were already jittery before the first bombs fell. WTI crude surged 22 percent to a six-month high in the days leading up to the strikes, driven by the unprecedented American military buildup in the region. Futures markets indicate an additional 5 to 10 percent jump when trading resumes Monday morning.
"This has bigger ramifications than Venezuela," warned one senior Goldman Sachs commodities strategist in a note to clients. "We're not talking about a single producer going offline. We're talking about the potential disruption of a third of global seaborne crude flows. That's a fundamentally different scenario."
Analysts expect a classic risk-off trade: global equities down 1 to 2 percent or more, US Treasury yields falling 5 to 10 basis points as investors flee to safety, gold surging, and the dollar strengthening against emerging-market currencies.
The Hormuz Bottleneck
Iran represents what energy analysts call "a chokepoint story" rather than merely a production story. Iran itself produces roughly 3.3 million barrels per day — significant but not irreplaceable. The existential risk is the Strait of Hormuz.
The strait, at its narrowest point just 21 miles wide, is the only sea passage from the Persian Gulf to the open ocean. Saudi Arabia, Iraq, Kuwait, and the UAE all depend on it for their oil exports. A sustained closure — even a partial one through mine-laying or naval harassment — would remove a catastrophic volume of crude from global markets.
The USS Gerald R. Ford carrier strike group, the world's most powerful warship formation, is currently deployed to ensure freedom of navigation through the strait. But mines, swarming fast boats, and shore-based anti-ship missiles make any military guarantee conditional.
Downstream Pain
The ripple effects extend far beyond the gas pump. Airlines, already operating on razor-thin margins, face fuel surcharges that could ground marginal routes. The trucking industry — backbone of American commerce — would see diesel costs spike within days. Agricultural input costs, from fertilizer to equipment fuel, would translate directly into food price inflation at precisely the moment American consumers are already stretched thin.
"Every dollar increase in oil price adds roughly two cents per gallon at the pump within two to three weeks," noted Patrick De Haan, head of petroleum analysis at GasBuddy. "If we see a sustained $15-20 per barrel increase, Americans are looking at gas prices above $4 nationally — potentially $5 or more in California and the Northeast."
The Federal Reserve, already navigating a delicate balance between inflation containment and growth support, now faces the worst possible scenario: an exogenous supply shock that simultaneously raises prices and threatens economic output. Stagflation — the dreaded combination of stagnation and inflation — has just moved from textbook risk to near-term possibility.
