USA–Iran War 2026: How the Strait of Hormuz Crisis Sent Oil Prices to $120 a Barrel
The 2026 US-Iran war triggered the largest oil supply shock in history. Brent crude surged to $120/barrel. Here's the full breakdown and what it means for gas prices.
WASHINGTON / TEHRAN — On February 28, 2026, the United States and Israel launched coordinated airstrikes against Iran under Operation Epic Fury, killing Supreme Leader Ali Khamenei and triggering a war that would reshape global energy markets for months to come.
What followed was the largest oil supply disruption in recorded history — a six-week crisis that sent Brent crude surging past $120 per barrel, pushed US gasoline prices above $4 a gallon, triggered airline fuel surcharges, and rattled financial markets worldwide.
Here is the full timeline of how it happened, how oil prices moved, and what it means for your wallet today.
HOW THE WAR STARTED
The conflict erupted against a backdrop of years of rising tension over Iran's nuclear program, ballistic missiles, and proxy forces across the Middle East. Oman-mediated nuclear talks collapsed in February 2026 following earlier US and Israeli strikes on Iranian nuclear sites in 2025.
On February 28, US B-2 stealth bombers, B-1 Lancers, B-52s, Tomahawk missiles, and HIMARS launchers struck Iran simultaneously with Israeli Air Force decapitation strikes. Supreme Leader Khamenei and several senior officials were killed at his residential compound.
Iran responded within hours with waves of missiles and drone attacks against Israel, US military bases across the region, and Gulf states including Bahrain, Kuwait, Saudi Arabia, and the UAE. Most critically for global markets, Iran declared the Strait of Hormuz closed on March 4, 2026 — a move that would send shockwaves through energy markets worldwide.
Sources: Wikipedia (2026 Iran War), Britannica, House of Commons Library
THE STRAIT OF HORMUZ: WHY IT MATTERS SO MUCH
The Strait of Hormuz is a narrow waterway between Iran and Oman — just 21 miles wide at its narrowest point — that serves as the single exit from the Persian Gulf for global oil shipments. In normal times, approximately 20% of all seaborne crude oil and liquefied natural gas (LNG) in the world passes through it daily.
In 2024, around 84% of the crude oil and 83% of the LNG transiting the Strait went to Asia. China, India, Japan, and South Korea alone accounted for nearly 70% of the oil flowing through the waterway, making them the most exposed nations to any disruption.
The US Congressional Research Service noted that combined bypass pipeline capacity through Saudi Arabia's East-West pipeline and the UAE's Abu Dhabi pipeline could handle only about 2.6 million barrels per day — far less than the 20+ million barrels per day that normally move through the Strait.
Source: Congress.gov / Library of Congress CRS Report R45281
OIL PRICE TIMELINE: FROM $72 TO $120 AND BACK
Pre-war (February 27, 2026): Brent crude trading at approximately $72 per barrel. WTI at $69.
March 2, 2026 — War Day 3: Brent crude surged 10–13% to $80–82 per barrel within 48 hours of the first strikes, as markets priced in the risk of Hormuz disruption.
March 4, 2026 — Hormuz Declared Closed: Iran formally closed the Strait, threatening and carrying out attacks on ships attempting to transit. The UK Maritime Trade Operations Centre reported 10 attacks on ships in the first week alone. The oil production of Kuwait, Iraq, Saudi Arabia, and the UAE collectively dropped by 6.7 million barrels per day by March 10.
March 12, 2026 — Peak Disruption: Brent crude surged past $120 per barrel as QatarEnergy declared force majeure on all LNG exports and the IEA described the situation as the "greatest global energy security challenge in history." Vitol CEO Russell Hardy later estimated one billion barrels of total oil production was lost due to the war.
March 31, 2026 — $4 Gas: US gasoline prices hit $4 per gallon — the highest since late 2023. In California, prices surpassed $6 per gallon in seven counties. Jet fuel in North America spiked 95%, prompting airlines to add fuel surcharges. US Postal Service, Amazon, and FedEx implemented fuel surcharges.
April 8, 2026 — Ceasefire Announced: Pakistan brokered a two-week pause. Oil prices began falling sharply — but shipping through the Strait remained far below pre-war levels.
June 17, 2026 — MoU Signed: The US and Iran signed a 14-point memorandum of understanding in a ceremony mediated by Qatar. Brent crude fell back toward $78, its lowest since March 3. But analysts warned the "hardest part — on delivering the pledges and promises — is yet to come," according to Vandana Hari of Vanda Insights, quoted by Al Jazeera.
June 26, 2026: Brent crude settled at $71.99 — WTI at $69.23, briefly back to pre-war levels, as more tankers successfully exited the Strait. But fresh Iranian drone attacks quickly renewed volatility.
July 7, 2026 — Today: A tanker was set ablaze after being struck by a projectile in the Strait of Hormuz. Brent crude jumped 3% to $74.16. WTI rose 2.8% to $70.44. Iran's military headquarters warned that any US interference in the Strait would be met with a "decisive and swift response." Peace talks in Doha are ongoing but fragile.
Sources: CNBC, Al Jazeera, Wikipedia (2026 Iran War Fuel Crisis), Economic Impact of the 2026 Iran War
THE WIDER ECONOMIC FALLOUT
The war's economic impact extended far beyond the pump.
Aviation: Middle East airspace came to a near-complete stop. Dubai International Airport — one of the world's busiest — was damaged by drone strikes and temporarily halted all flights. Jet fuel prices across North America spiked 95%.
Shipping: Shipping lines rerouted to avoid both the Strait of Hormuz and the Red Sea. The International Maritime Organization (IMO) launched a phased evacuation of more than 11,000 stranded seafarers, which was repeatedly paused due to ongoing attacks.
Global Food Supply: Gulf Cooperation Council states, which rely on the Strait for over 80% of their caloric intake, faced a "grocery supply emergency." By mid-March, 70% of the region's food imports were disrupted, causing consumer prices to spike 40–120%.
Asia: Countries most dependent on Gulf oil — Pakistan, Bangladesh, Vietnam, and Sri Lanka — faced severe fuel shortages. Sri Lanka introduced a four-day working week. India reduced excise duties on petrol by ₹10 per litre to protect consumers. Canada saw gas prices rise approximately 30% from March to April.
Insider Trading Scandal: A Financial Times investigation found $580 million in bets on falling oil prices placed just 15 minutes before Trump announced a pause in strikes on March 23. A second series worth $950 million was placed before a ceasefire announcement on April 7. A third series worth $750 million occurred before Iran's announcement of a Strait reopening on April 17. All three remain under investigation.
Source: Wikipedia (Economic Impact of the 2026 Iran War), Britannica, Congress.gov
WHERE THINGS STAND TODAY — JULY 8, 2026
The situation remains deeply unstable. Peace talks are ongoing in Doha, Qatar, where the US and Iran wrapped up indirect technical talks on July 2, with Qatar reporting "positive progress." However:
· Iran continues to warn the US against interference in the Strait, threatening a "decisive and swift response"
· A tanker was attacked and set ablaze in the Strait on July 7 — the day of Khamenei's funeral
· OPEC faces the possible exit of Iraq, its second-largest producer, after the UAE already left the cartel in May
· The US signed a memorandum of understanding with Iran on June 17, but its 14-point framework has not been officially published and its implementation remains uncertain
· A multinational armada of warships from the UK, France, and other NATO allies is expected to arrive in the Strait to secure freedom of navigation
Brent crude stands at $74.16 as of July 7, 2026 — still $2 above its pre-war level, and highly sensitive to any new escalation.
Sources: CNBC (July 7), Al Jazeera (July 2 & July 5), GlobalSecurity.org (Day 130 Update)
WHAT IT MEANS FOR YOUR MONEY
Gas prices: National average gas prices rose $1.16 per gallon from the start of the war. While prices have retreated from the April peak, renewed tanker attacks could push them higher again. Watch Brent crude — every $10 rise in oil translates to roughly 25 cents per gallon at the pump.
Inflation: The CPI rose 4.2% over the 12 months to May 2026 — the largest annual increase since April 2023 — with oil shock costs a major contributor. Former Fed Chair Janet Yellen warned that energy price impacts could complicate the Fed's fight to bring inflation back to 2%.
Investments: Energy stocks (ExxonMobil, Chevron, ConocoPhillips) outperformed during the peak conflict. Defense contractors saw gains. Airlines, shipping, and consumer discretionary stocks bore the brunt of higher fuel costs.
OPEC dynamics: With the UAE having left OPEC in May and Iraq potentially following, the cartel's ability to manage global supply is increasingly uncertain — a structural shift that could keep oil prices volatile through 2026.
Your action steps:
· Fill up strategically: Watch Brent crude futures — any uptick signals higher pump prices within days
· Review energy exposure in your portfolio: Oil and defense names remain geopolitically sensitive
· Lock in travel bookings: Jet fuel costs remain elevated; airlines may add more surcharges if the Strait situation worsens
· Monitor your HYSA: The Fed's inflation uncertainty makes rate cuts less likely, keeping savings rates elevated
REFERENCES
· Wikipedia — 2026 Iran War: https://en.wikipedia.org/wiki/2026_Iran_war
· Wikipedia — 2026 Iran War Fuel Crisis: https://en.wikipedia.org/wiki/2026_Iran_war_fuel_crisis
· Wikipedia — Economic Impact: https://en.wikipedia.org/wiki/Economic_impact_of_the_2026_Iran_war
· Britannica — 2026 Iran War: https://www.britannica.com/event/2026-Iran-war
· Congress.gov CRS Report — Strait of Hormuz: https://www.congress.gov/crs-product/R45281
· CNBC — Oil prices rise after tanker attacks, July 7, 2026: https://www.cnbc.com/2026/07/07/oil-prices-iran-strait-hormuz.html
· CNBC — Oil prices fall as tankers exit Strait: https://www.cnbc.com/2026/06/26/oil-prices-middle-east-iran-strait-of-hormuz-opec-iraq-wti-brent-crude.html
· Al Jazeera — Oil prices drop on MoU hopes: https://www.aljazeera.com/economy/2026/6/17/oil-prices-continue-slide-amid-hopes-for-peace-opening-of-strait-of-hormuz
· Al Jazeera — War updates July 2, 2026: https://www.aljazeera.com/news/liveblog/2026/7/2/iran-war-live-positive-progress-as-us-tehran-wrap-up-indirect-talks
· GlobalSecurity.org — Day 130 Update: https://www.globalsecurity.org/military/ops/iran-war-oprep.htm
· House of Commons Library — US-Iran Ceasefire: https://commonslibrary.parliament.uk/research-briefings/cbp-10637/