The War in Iran Has Caused the Biggest Oil Supply Disruption in History, Energy Watchdog Says

The war in Iran is causing the largest disruption to global oil markets in history, with supply expected to fall by about 8 million barrels per day in March, according to the International Energy Agency. The situation has led to a sharp spike in oil prices, with Brent crude nearing $100 a barrel. The Strait of Hormuz, a critical trade route for global oil shipments, has seen flows reduced by over 90%, compounding the supply risks.

Goldman Sachs has raised its 2026 oil price forecasts for the second time in a week, reflecting the heightened risk of a prolonged disruption to traffic through the Strait of Hormuz. The firm now sees a potential 2008-like price spike if the chokepoint remains largely closed for 21 days. Analysts at Goldman and other major brokerages are closely monitoring the geopolitical situation and its impact on global oil markets.

Brent and U.S. West Texas Intermediate (WTI) futures have surged to their highest levels since mid-2022, with both benchmarks posting more than 10% weekly gains. The market reaction has been driven by fears of prolonged supply disruptions and the uncertainty surrounding the conflict's resolution. The International Energy Agency has noted that the disruption is larger than previous major supply shocks like the 1973 Arab oil embargo.

Why Is the Disruption So Severe?

The closure of the Strait of Hormuz is exacerbating the supply crisis, as it handles over 20% of global oil flows. The inability to export oil from the Gulf region has led to a sharp reduction in global supply, with Gulf producers forced to cut output. The IEA estimates that the closure will reduce global oil supply by 8 million barrels a day this month.

The impact on the global economy is already evident, with oil prices surging and economic uncertainty rising. The IEA has revised its global consumption growth forecasts downward by roughly 25%, to 640,000 barrels a day, due to price surges and demand uncertainty.

What Are the Implications for Global Markets?

Goldman Sachs has warned that an extended period of higher oil prices could significantly impact S&P 500 earnings, reducing them by up to four percent for every one percentage point drop in U.S. economic growth. A prolonged disruption could threaten equity valuations and industrial activity. Historically, the impact of geopolitical risk shocks on equity prices has been short-lived, but the current situation is different due to the scale of the disruption.

The S&P 500 index is down over 2% since the start of the conflict, reflecting investor concerns about earnings and economic growth. AI investments and cloud services, which accounted for roughly 25% of S&P 500 earnings-per-share growth in 2025, are also being impacted.

What Are Analysts Watching Next?

Analysts are closely watching the duration of the conflict and the potential for a resolution. Goldman Sachs expects oil prices to stabilize later in the year if the disruption proves to be temporary. However, if the Strait of Hormuz remains closed for an extended period, oil prices could reach higher levels and end the year at higher prices.

The situation is also affecting other markets. Citi has upgraded ratings for two North American chemical producers, Dow Inc. and LyondellBasell Industries, due to the feedstock advantages created by the supply disruptions. The disruptions are favoring producers using natural gas feedstock, which is now relatively cheaper compared to global energy prices.

The ASEAN ministers have also called for an immediate cessation of hostilities, citing the negative economic effects of rising oil prices on Southeast Asia. The region is taking measures to stabilize domestic markets and conserve energy in the face of rising costs and supply uncertainty.

Global markets are bracing for the possibility of a prolonged disruption, with major brokerages adjusting their forecasts and investors reassessing risk exposures. The situation highlights the fragility of global supply chains and the potential for geopolitical events to have far-reaching economic consequences.