As tensions continue to flare between the U.S. and Iran, global energy markets remain on edge, bringing the Middle East’s famed Strait of Hormuz back in focus.
Crude oil prices have been rallying over the past week, with WTI March futures up 1.47% over the past week, and 0.42% on Sunday night, trading at $59.17 per barrel. Natural gas February futures are similarly trading up 2.30% during the day, at $3.242 per MMBtu, or Metric Million British Thermal Unit.
The Strait of Hormuz Shock
Wedged between the Persian Gulf and the Gulf of Oman, the Strait of Hormuz stands as one of the world's most critical strategic chokepoints, with roughly one-third of global seaborne oil shipments and 19% of natural gas passing through the narrow waterway.
According to a report by the U.S. Energy Information Administration, an average of 20 million barrels per day flowed through this narrow strait on the coast of Iran, the United Arab Emirates and Oman in 2024, making conflicts in this region a serious risk to global energy security.
Last year, Iran’s parliament voted to authorize a potential closure of this strait in response to U.S. airstrikes on the country’s nuclear sites.
Analysts at Goldman Sachs had warned that in such a scenario, Brent crude oil could spike to $110 per barrel before moderating. They said, “The economic incentives, including for the US and China, to try to prevent a sustained and very large disruption of the Strait of Hormuz would be strong.”
Close to 80% of the oil that flows through the strait is shipped to Asia, mainly China, India, South Korea and Japan, according to a report by the Institute for Energy Research.
Record Global Surplus
Despite this threat, however, energy markets in 2026 are well cushioned with a 3.84 million barrels per day surplus, according to a report by the IEA. However, this is clearly not enough to make up for the massive supply shock that comes with disruptions in the Hormuz.
WTI February crude oil futures are up 0.51% on Sunday, trading at $59.24 a barrel, and is up 1.58% over the past week. February natural gas futures are up 2.27% on Sunday, trading at $3.240 per MMBtu.
The United States Oil Fund LP (NYSE:USO), which primarily invests in futures of light, sweet crude oil, was up 0.36% on Friday.
Trump Sets Sights On Iran
President Donald Trump, on Friday, said that the U.S. will come to the “rescue” of Iranians amid escalating protests against the government.
Speaking to reporters on board Air Force One on Sunday, Trump said that Iranian leaders “want to negotiate,” following his threats of military action. He, however, added that “we may have to act before a meeting.”
This comes just days after U.S. forces raided Venezuela, which ended with the capture of the country’s President Nicolás Maduro last week.
Photo: Anton Watman/Shutterstock
