Oil futures: will oil breach $100 as Iranian conflict escalates?

Iran conflict in brief

On Saturday 28 February 2026, the United States and Israel launched a coordinated military operation against Iran, dubbed ‘Operation Epic Fury’ by President Donald Trump, targeting air defence systems, naval capabilities and, according to US officials, Iran's nuclear programme.

Ayatollah Ali Khamenei was killed as part of the Israeli missile strikes on Tehran targeting high-ranking Iranian officials. His death was confirmed by the Iranian government on 1 March.

Along with Khamenei, Israel's strikes also killed the IRGC commander, Iran's defence minister, the chief of staff of the armed forces, and the secretary of Iran's Security Council. A three-person interim council, comprising President Masoud Pezeshkian, the head of the judiciary and senior cleric Alireza Arafi has assumed power while the Assembly of Experts selects a new supreme leader.

Iran has retaliated swiftly and, by most accounts, more aggressively than markets anticipated.

Missile and drone strikes from Iran have hit UAE territory, including Jebel Ali port, Abu Dhabi port infrastructure and several hotels, as well as targets in Saudi Arabia and Bahrain. Iran had pre-positioned warheads near regional borders in anticipation of this scenario, suggesting the broader escalation was planned, not improvised.

President Trump stated the ‘overwhelming military offensive’ would continue until the US's objectives were achieved. Israel launched fresh strikes against both Iran and Hezbollah targets in Lebanon late on Sunday. As of today, there appears to be no real signs of de-escalation.

The military buildup had been visible for weeks. Two US carrier strike groups were deployed to the region — the USS Abraham Lincoln already operating near Iranian waters, and the USS Gerald R. Ford, currently the world's largest warship, having arrived in theatre after more than 150 US military cargo flights delivered weapons systems and ammunition to the region.

Significantly, the Pentagon had also begun moving some personnel out of the Middle East ahead of the strikes. This is perhaps an operational signal, in retrospect, that strike planning had moved well beyond the theoretical.

Where oil prices stand

Energy markets moved dramatically when trading opened after the weekend. Brent Crude futures rose have risen to as high as $84 a barrel — their highest since January 2025. WTI crude is up to approximately $76, its highest level since June.

Even before the weekend's escalation, oil prices had risen 17% this year, driven by Trump's ratcheted-up sanctions on Iran, his increasingly confrontational rhetoric toward the regime and previous actions in Venezuela.

The $70 level, breached for the first time since July 2025 in the days before the strikes, was already psychologically significant. Round numbers tend to attract additional momentum buying and media attention, which can itself become a market-moving factor.

The jump to nearly $84 in the immediate aftermath of the strikes represents the geopolitical risk premium that markets had already been starting to price in for weeks, suddenly crystallising all at once.

Strait of Hormuz

No single factor matters more to the oil price outlook right now than the Strait of Hormuz.

At its narrowest point just 24 miles wide, it handles approximately 21 million barrels of oil per day, roughly one-fifth of global consumption. Tankers travelling through the strait carry crude oil and LNG from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran. There is no realistic alternative for the bulk of this volume.

A commander in Iran's Revolutionary Guard Corps declared today that the strait was ‘closed’ and that any vessel attempting to pass would be set ‘ablaze.’ At least five tankers have been damaged, two personnel killed, and about 150 ships stranded. Traffic is down at least 80%, according to maritime intelligence analyst Michelle Bockmann at Windward.

Iran has not had to implement a full naval blockade to achieve an effective halt; the threat alone has been sufficient. At least six major cargo shipping companies halted or diverted vessels over the weekend. Qatar has halted some LNG production and QatarEnergy is set to declare force majeure on shipments. Saudi Arabia’s Aramco has shut its biggest domestic oil refinery after a drone strike.

This is not without historical precedent. During the ‘tanker war’ of the 1980s, Iran and Iraq attacked oil shipping, mined international waters and targeted vessels with missiles and speedboats. Iran never fully closed the strait then, but it demonstrated clearly its capacity to make passage dangerous and expensive.

The current situation represents a more direct and deliberate escalation of that playbook, and critically, even without a physical blockade, heightened risk drives up tanker insurance premiums and freight rates, raising the delivered cost of oil for consumers worldwide regardless of whether a barrel ever stops moving.

Interested in trading oil?

Oil markets are constantly shaped by geopolitical shifts, OPEC decisions and global demand, making them one of the most actively watched commodity markets in the world.

If you're looking to get exposure to crude price movements, there are several ways to do it: oil futures, CFDs, options, spread betting and spot oil — each with different cost structures, leverage profiles, and timeframes. 

Oil trading carries significant risk. Prices can move sharply and unpredictably in response to supply disruptions, macroeconomic data or policy changes. Leveraged products like CFDs and spread bets amplify both gains and losses.

You could lose more than your initial deposit. It's also worth paying close attention to when you trade — liquidity and volatility vary considerably across sessions, and trading outside peak hours can widen spreads. Always ensure you understand the product you're using before you trade.

Past performance is not an indicator of future returns.

Ready to get started? Learn how to trade oil with us.

Can OPEC+ come to the rescue?

On Sunday, in an emergency meeting, OPEC+ agreed to raise oil output by 206,000 barrels per day in April, ending a three-month pause in production hikes, though the increase fell well below the larger boosts of circa 500,000 bpd that had been discussed in recent days.

Few analysts believe it will be enough. Jorge Leon at Rystad Energy warned that ‘if oil cannot move through Hormuz, an extra 206,000 barrels per day does very little to ease the market,’ arguing that logistics and transit risk matter more than production targets right now.

Helima Croft, head of commodity-markets strategy at RBC Capital Markets, noted that spare capacity is ‘really only sitting in Saudi Arabia at this stage, with the rest of the producers effectively maxed out — hence the actual barrel-add will be exceedingly modest.’

Of course, Saudi Arabia and the UAE do have some overland alternatives. Saudi’s East-West pipeline can route oil via the Red Sea, but even if approximately 5 million barrels per day can be moved through alternative methods, around 10 million barrels per day remains effectively stranded. OPEC's production increase risks becoming irrelevant if the barrels cannot physically reach the market.

There is also a less-discussed positive scenario embedded in the diplomatic rubble: if a ceasefire leads eventually to a comprehensive nuclear agreement and sanctions relief, then Iran, which holds some of the world's largest proven oil reserves, could meaningfully increase exports, adding supply to the global market and unwinding much of the current risk premium.

That remains a distant prospect right now, but it is a real one.

The $100 question

The prospect of $100 oil — a psychologically significant threshold last breached during the post-pandemic surge of 2022 — is now being discussed openly by major institutions. Analysts from both RBC and Barclays have said prices could reach that level. Middle Eastern leaders have reportedly privately warned Washington ahead of the strikes that a war on Iran could push oil above the mark.

Stephen Innes, managing partner at SPI Asset Management, has described a full closure of the strait lasting more than a few days as the ‘nightmare scenario,’ suggesting prices could leap to between $120 and $150 a barrel.

JPMorgan Chase analysts identified four variables that will drive the trajectory: how much supply is disrupted, how long any disruption lasts, whether supply from other sources can be mobilised quickly, and what comes next diplomatically or militarily.

Not everyone is at the pessimistic end of the spectrum. Amrita Sen, founder and director of research at Energy Aspects, told CNBC she expects prices to hold around the $80 level, arguing that the US and Israel have sufficient military power to ultimately neutralise Iran's ability to enforce a full closure, though single attacks on ships remain difficult to prevent.

For oil futures traders specifically, the current environment is shifting the shape of the futures curve.

Backwardation — where spot prices exceed futures prices, signalling tight near-term supply — tends to be bullish and reflects exactly the kind of acute supply anxiety the market is experiencing now. Contango, by contrast, would signal oversupply and weak near-term demand.

The current move toward steep backwardation is itself a market signal worth watching.

Broader market fallout

The oil market is not operating in isolation. The US Dollar Index rose 1% and gold futures have jumped as investors flee to safe-haven assets. Japan's Nikkei, MSCI's broadest Asia-Pacific index and also European equity futures have declined.

Higher oil prices feed directly into inflation through energy costs, transportation and manufacturing inputs, leaving central banks in energy-importing countries facing difficult trade-offs between controlling inflation and supporting growth.

Iran exports roughly 1.6 million barrels of oil a day, mostly to China, which may need to look elsewhere if those exports are disrupted, though China has ample strategic reserves and could boost imports from Russia.

For US consumers, the spike could push gas prices up by 10 to 30 cents on average in the coming days, with some stations seeing much larger rises. That has direct political implications for the Trump administration heading into November's midterm elections.

For investors, the volatility creates both opportunities and risks. Oil futures volatility increases hedging and speculative activity. Airlines, shipping companies and industrial consumers face cost pressures even if they hedge. Exposure to energy equities, commodities and inflation-linked assets may offer some insulation against a sustained geopolitical risk premium.

What happens next?

The range of outcomes remains wide. Analysts broadly identify three scenarios:

1. In a rapid de-escalation scenario, a ceasefire or diplomatic intervention within days allows shipping to resume, OPEC+ output increases take effect, and Brent retreats towards perhaps $75. The IEA has noted that the market was well-supplied before the conflict and that structural fundamentals ( including strong US, Guyana and broader non-OPEC output) have not changed. Strategic petroleum reserves in the US, China and OECD countries will also provide a buffer against short-term disruptions.
2. In a prolonged conflict scenario lasting several weeks, with continued interdiction of tanker traffic, prices are widely expected to breach $90 and test $100. Markets can arguably tolerate a price spike but what they cannot tolerate is prolonged uncertainty over flows through the world's most critical energy corridor.
3. In a worst-case, full-closure scenario, of sustained Iranian strikes on Gulf infrastructure combined with an enforceable strait blockade, analysts are foreseeing $120 to as much as $150 per barrel. This would represent a genuine energy crisis, and while it remains a low-probability tail risk, it is no longer a purely theoretical one.

For now, global oil markets appear to be acknowledging much of the seriousness of the conflict, but are also signalling that this is not a systemic crisis.

Whether that distinction holds will depend almost entirely on decisions made in the coming days; in Washington, Tehran, Riyadh and on the decks of tankers hovering at the entrance to the world's most oil-consequential stretch of water.