Oil market braces for turbulence after U.S.-Israel strikes across Iran

GLOBAL energy markets are preparing for sharp swings after the United States and Israel carried out a sweeping, coordinated military operation across Iran, striking multiple cities including the capital, Tehran. The scale and geographic spread of the assault mark one of the most significant escalations in Middle East tensions in recent years, with immediate implications for oil supply, shipping routes and global inflation.

Explosions were reported in Tehran as well as in the key cities of Isfahan, Qom and Karaj. Witness accounts described plumes of smoke rising from districts believed to house sensitive government and military facilities. Israeli Defense Minister Israel Katz confirmed what he called a ‘preemptive strike,’ as Israel declared a nationwide state of emergency and shut its airspace to civilian traffic. Schools were closed, public gatherings suspended and non-essential activities halted under orders from the Home Front Command, oilprice.com reeported.

U.S. officials characterised the assault as extensive rather than symbolic, reportedly involving fighter aircraft operating from regional bases and aircraft carriers. The strikes come amid months of deteriorating diplomacy and rising hostility between Washington and Tehran, following failed talks in Switzerland that had aimed to de-escalate tensions over Iran’s nuclear programme and regional posture.

Oil markets on edge

Crude prices had already been trending higher in recent weeks as geopolitical risks mounted. On Friday, benchmark contracts climbed more than 2 percent amid speculation that negotiations between Iran and the United States were collapsing. The overnight strikes are now expected to inject a significant ‘war premium’ into prices when markets fully reopen.

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At the center of market anxiety is the Strait of Hormuz, the narrow maritime corridor through which roughly 20 percent of global oil supply passes. With Iranian territory under direct attack, the waterway is now viewed by traders as an active conflict zone. Any disruption to tanker traffic, whether through military engagement, mining, or insurance restrictions, could sharply constrain supply and send prices spiking.

Shipping insurers are likely to reassess risk premiums immediately. A surge in freight and insurance costs alone could lift crude benchmarks even without physical supply losses. Energy analysts warn that even limited skirmishes around the Strait would have outsized effects on sentiment and volatility.

Iran’s preemptive oil moves

In anticipation of possible hostilities, Iranian authorities reportedly accelerated crude exports in recent days. Satellite imagery and shipping data showed a spike in tanker loadings at key terminals as Tehran sought to maximize revenue and reduce onshore storage exposure. The effort suggests Iranian officials expected some form of military action and moved swiftly to cushion the economic impact.

Iran remains under heavy sanctions, but it still exports significant volumes, particularly to Asian buyers. A sustained disruption could tighten medium-sour crude supplies, forcing refiners to compete for alternatives from Gulf producers, West Africa and the United States. That scramble could reshape trade flows and widen regional price differentials.

Broader political context

The strikes also unfold against the backdrop of domestic unrest inside Iran. Human rights organisations estimate that thousands of protesters have been killed in a sweeping crackdown in recent months. U.S. President Donald Trump cited both Iran’s nuclear activities and its internal repression as justifications for the operation.

This is not the first direct U.S. strike on Iranian soil in the current cycle of tensions. In June 2025, American aircraft targeted nuclear facilities, including the Fordo enrichment site. That confrontation resulted in a short-lived ceasefire. However, the present operation appears broader in scope and more coordinated with Israel, raising fears of a prolonged regional confrontation rather than a contained episode.

Immediate economic implications

The most immediate effect is likely to be oil price volatility. Analysts expect a sharp upward move at the next full trading session, potentially exceeding recent weekly gains. A sustained spike above key resistance levels could filter through to global fuel prices, adding inflationary pressure at a time when many central banks are still battling elevated consumer costs.

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Higher crude prices would have ripple effects across emerging markets that rely heavily on imported fuel. Countries in Africa and Asia could face increased subsidy burdens or pass-through costs to consumers. Conversely, major exporters such as Saudi Arabia, the United Arab Emirates and Nigeria could see temporary revenue windfalls, though gains might be offset by regional instability and shipping disruptions.

“I foresee an oil price of $80-$90 in a few weeks if the crisis in the Middle East persists,” said a Lagos-based economist, Mr Daalu Osinkandu. “This is an upside for Nigeria’s revenue and budget but also a potential downside for the petrol price and, of course, inflation.”

Financial markets more broadly may react with a risk-off posture. Equities, particularly in energy-intensive sectors, could come under pressure, while safe-haven assets such as gold and the U.S. dollar may strengthen.

Strategic risks ahead

The greatest uncertainty centers on Iran’s response. Retaliation could range from missile or drone strikes against regional targets to asymmetric actions in maritime corridors. Any move to threaten or close the Strait of Hormuz would represent a dramatic escalation with global economic consequences.

For now, traders are bracing for turbulence. The Middle East supplies roughly a third of the world’s seaborne crude, and history shows that even limited disruptions in the region can reverberate across markets within hours. With airspace closed over Israel and heightened security across the Gulf, the risk premium embedded in oil prices may persist well beyond the initial shock.

As the situation evolves, energy markets will remain highly sensitive to military developments, diplomatic signals and shipping data. What began as a regional strike has quickly become a global economic flashpoint.