Oil prices soar as Israel-Iran conflict escalates, raising fears of Middle East supply disruption.

Global oil prices experienced a sharp and sudden surge following reports that Israel had carried out a military strike on Iran, signaling a dramatic escalation in the already volatile tensions within the Middle East. This development triggered immediate reactions across global financial markets, especially in the energy sector, with traders and investors growing increasingly anxious about the potential for significant disruptions in oil supply from one of the world’s most critical energy-producing regions.

Shortly after the news broke, the price of Brent crude oil and Nymex light sweet crude rose by more than 10%, pushing both benchmarks to their highest levels since January. This reaction reflects not only the severity of the geopolitical tensions but also the vulnerability of global energy markets to any instability in the Middle East. The region accounts for a substantial portion of the world’s crude oil production and exports, meaning that any escalation involving key players like Iran and Israel could have far-reaching consequences for energy availability and pricing around the globe.

The cost of crude oil plays a crucial role in the global economy. It influences the price of transportation, heating, electricity, and is deeply embedded in the production and supply chains of numerous consumer goods. An increase in oil prices typically results in higher costs across sectors, from food and fuel to manufacturing and logistics. Consumers may start to feel the effects through rising prices at supermarket shelves and at fuel stations, while businesses face increased operational costs.

Although the initial spike in prices was dramatic, by midday during Asian trading hours, oil prices moderated slightly but still remained significantly elevated. Brent crude was trading at approximately $74.50 per barrel, while Nymex crude settled at $73.20 per barrel — both still up by about 7.5% compared to the previous day’s levels. This partial pullback suggests that while the markets were reacting strongly, they were also cautiously waiting for further developments and clarification on the scope of the situation.

Simultaneously, traditional "safe haven" assets such as gold and the Swiss franc experienced notable gains. Investors typically turn to these assets in times of geopolitical instability or economic uncertainty, viewing them as more secure and reliable compared to riskier investments like stocks or emerging market assets. The upward movement in these asset classes signals a broad-based risk-off sentiment in the markets, with traders reallocating capital in anticipation of heightened volatility.

Later on Friday, the situation escalated further when the Israel Defense Forces (IDF) announced that Iran had launched approximately 100 drones toward Israel in what appeared to be a retaliatory move. This development deepened concerns that the region could be on the brink of a broader military confrontation, one that could have catastrophic implications not only for the local population but for the stability of global energy supplies.

Analysts interviewed by the BBC emphasized that energy traders and geopolitical observers alike would be closely monitoring how events unfold over the next few days. According to Vandana Hari, the founder of energy market consultancy Vanda Insights, the scenario is extremely volatile. “It’s an explosive situation, albeit one that could be defused quickly, as we saw in April and October last year, when Israel and Iran exchanged direct strikes,” she noted. However, Hari also cautioned that if the conflict escalates into a full-scale war, it could severely disrupt oil flows from the Middle East, potentially sparking a global energy crisis.

One of the gravest risks lies in the possibility that Iran may choose to target vital oil infrastructure or disrupt shipping in the Strait of Hormuz — a narrow but strategically critical waterway through which roughly one-fifth of the world’s oil supply is transported. The Strait of Hormuz is bordered by Iran to the north and by Oman and the United Arab Emirates (UAE) to the south, serving as a maritime gateway that connects the oil-producing Persian Gulf with the Arabian Sea and beyond. Any significant military activity in or around this chokepoint could lead to shipping delays, damage to infrastructure, or even the closure of the strait — all of which would send oil prices skyrocketing and impact energy security worldwide.

Currently, dozens of oil tankers are either en route to or departing from the Strait of Hormuz at any given time, carrying oil and natural gas to global markets in Asia, Europe, and North America. The free flow of these shipments is essential to maintaining stable energy supplies and avoiding severe economic shocks.

Saul Kavonic, head of energy research at MST Financial, described the current market reaction as an "initial risk-on" response — a term used to describe a short-term increase in risk appetite driven by a specific event. He warned, however, that this reaction could be just the beginning. “Over the next day or two, the market will need to factor in where this could escalate to,” Kavonic said, suggesting that traders and policymakers should brace for further volatility and uncertainty.

As the world watches this rapidly evolving situation, markets, governments, and industries are all on high alert, aware that the stakes extend far beyond regional politics. The outcome could reshape energy flows, impact global inflation, and redefine geopolitical alliances in a region that has long been at the center of the world’s strategic and economic interests.