Global oil prices have hit a four-year high above $122 a barrel, pushing the world economy toward stagflation as U.S.-Iran peace efforts remain deadlocked.
Brent crude futures surged past $121 a barrel Thursday morning, briefly spiking as high as $126, the largest supply disruption in the history of the global oil market, according to the International Energy Agency, whose head described what is unfolding as the “greatest global energy security challenge in history.”
The trigger for Thursday’s move was a bombshell report by Axios that President Donald Trump is set to receive a briefing on plans for a fresh series of military strikes against Iran. This development sent traders scrambling to reprice the risk of an already catastrophic conflict spiraling even further out of control.
Shipping traffic through the Strait of Hormuz has been largely blocked by Iran since February 28, 2026, when the United States and Israel launched an air war against Iran and assassinated its Supreme Leader, Ali Khamenei.
In retaliation, Iran launched missile and drone attacks on Israel, U.S. military bases, and U.S.-allied Gulf states. The Iranian Revolutionary Guard issued warnings forbidding passage through the strait, boarded and attacked merchant ships, and laid sea mines in the waterway.
The consequences for global energy markets have been swift and savage. Brent crude oil prices surged 10–13% to around $80–82 per barrel as early as March 2, 2026. Since then, prices have nearly doubled.
The Strait of Hormuz is crucial for nearly 20 million barrels per day of global oil production. Saudi Arabia, Iraq, and the United Arab Emirates together exported 13.1 million barrels per day of oil via the strait, with China as the main destination.
Put simply: when the Strait of Hormuz shuts, the world bleeds oil.
The damage being inflicted on ordinary consumers is already severe and widening by the day. Gas prices have risen $1.16 a gallon in the United States since the start of the war, with prices expected to hit $5.00 a gallon if the Strait of Hormuz is not reopened. A gallon of gas cost an average of $4.10 on Sunday, with prices up about 27% since the start of the war.
The pain extends far beyond the pump. The U.S.-Israeli war with Iran is costing the European Union almost 500 million euros every day, raising prices at the pump and sparking fears of a jet fuel shortage within weeks, according to European Commission President Ursula von der Leyen.
Bloomberg Economics’ big data price tracker put the U.S. CPI for March at 3.4% year on year, a marked increase from 2.4% in February, with rising fuel prices the main culprit. For Europe, the arithmetic is grimmer still. Dutch TTF gas benchmarks nearly doubled to over €60/MWh by mid-March.
The European Central Bank postponed its planned interest rate reductions, raising its 2026 inflation forecast and cutting GDP growth projections, with economists warning that energy-intensive economies face a high risk of a technical recession.
Analysts at Goldman Sachs have warned that should oil reach $170 a barrel, the impact on inflation and growth would roughly double, a stagflationary shock that could shift everything from the path ahead for central banks to the outcome of U.S. midterm elections.
More strikingly, U.S. government officials and Wall Street analysts are now beginning to consider the prospect that oil prices could surge to an unprecedented $200 a barrel.
Efforts to end the conflict have stalled at nearly every turn. Trump has been adamant that the objective of the war is now to ensure Iran can never obtain a nuclear weapon. He has indicated that any deal must include a handover of Iran’s enriched uranium and an end to the country’s domestic enrichment program.
Iran, for its part, has drawn its own red lines. Tehran has declared that the Strait of Hormuz will not return to its previous state “under any circumstances” and that the American naval blockade at Iranian ports would need to end before any agreement could be reached.
The countries agreed to a two-week ceasefire on April 8, which Trump has since extended, but negotiations have lost momentum in recent days, dashing hopes for a quick resolution. Iran has since accused Washington of repeated “breaches of trust.”
Compounding the chaos is the structural fracturing of OPEC+ itself. The United Arab Emirates announced Tuesday it would leave the Organization of Petroleum Exporting Countries after nearly 60 years of membership, a seismic departure that analysts say will further erode the group’s ability to stabilize global supply.
Even so, any relief from increased UAE production remains a distant prospect. As long as the Strait of Hormuz remains effectively closed, even willing producers are largely powerless to get their crude to market.
The impact on supplies has been partly alleviated by Saudi Arabia and the UAE rushing to reroute oil via pipelines that circumvent the Strait of Hormuz, while the U.S. and other governments have announced a record release of stockpiled oil to help tame prices. But analysts concede it is nowhere near enough.
ING analysts see demand destruction, consumers and industries simply cutting back because prices are prohibitively high, as perhaps the only realistic near-term pressure valve. But even a projected loss of 1.6 million barrels per day of demand, they warn, is clearly not sufficient to close the supply gap the world currently faces.
The Strait of Hormuz is not reopened. There is no cohesive plan for reopening it. And now negotiations have basically stopped, Patrick De Haan of GasBuddy said bluntly this week.
The Iran war has cost an estimated $25 billion so far, according to a Pentagon official who testified before Congress, with most of the expense on armaments. The meter is still running on the battlefield, at the negotiating table, and at every gas station across the planet.
John Evans of oil broker PVM perhaps put it most starkly: for those who believe Brent prices cannot reach $150 a barrel, he says, they would do well to look away now.
WHAT YOU SHOULD KNOW
The U.S.-Iran war has triggered the worst energy crisis in modern history. With the Strait of Hormuz, the artery through which one-fifth of the world’s oil flows effectively choked off, oil prices have nearly doubled since the conflict began in February 2026 and show no sign of retreating. Diplomatic talks have collapsed, a fragile ceasefire has lost momentum, and fresh military strikes are reportedly back on the table.
