A tanker is seen at Khor Fakkan Container Terminal, the region’s only natural deep-sea port and one of the Emirate of Sharjah’s main container ports, along the Strait of Hormuz, a waterway through which a fifth of the world’s oil production passes, on June 23, 2025.
Giuseppe Cacasse | AFP | Getty Images
Oil markets are bracing for a possible supply shock after the weekend’s U.S. attack on Iran reignited concerns that flows through the Strait of Hormuz could be disrupted.
Analysts expect an immediate “sharp” reaction to oil prices when trading resumes in New York on Sunday night, but the bigger question is whether tensions could escalate and continue to disrupt Gulf region exports.
“At this point, a full-scale military conflict between the United States and Iran appears to be on the table, but this is unprecedented and it would be impossible to assess its trajectory,” said Vandana Hari, CEO of energy research firm Vanda Insights.
“We envision a worst-case scenario for oil, with many days of maximum retaliation by Iran and its proxies, including a major disruption to the flow of oil through the Middle East,” Hari told CNBC. That is unless the United States can preemptively disarm Iran’s navy and military and ensure that tanker traffic through the Strait of Hormuz continues to flow normally.
Amid rising tensions, attention is once again focused on the Strait of Hormuz. Any disruption in the Strait of Hormuz could have an immediate and devastating impact on global oil and LNG flows.
Crude oil price change from previous year
The strait, located between Oman and Iran, is an important shipping route and potential choke point for the world’s crude oil, with around 13 million barrels per day passing through it in 2025, representing about 31% of all offshore oil flows, Kupler data showed.
It connects major Gulf producing countries such as Saudi Arabia, Iran, Iraq and the United Arab Emirates with the Gulf of Oman and the Arabian Sea.
Reuters reported on Saturday that Aspides officials at the European Union’s naval mission said the merchant ship had received a VHF radio message from Iran’s Revolutionary Guards warning that “no ships will be allowed to pass through the Strait of Hormuz.”
The official was quoted as saying that the Iranian government had not officially confirmed any instructions to close the waterway.
Early signs are of a larger attack on Iran, and a counterattack that could escalate and draw in multiple Gulf states.
Reuters noted that Iran has repeatedly threatened over the years to close the narrow passageway in response to attacks on the Islamic Republic.
Iran has repeatedly threatened in the past to close the narrow passageway in response to attacks on the Islamic Republic.
Rapidan Energy Group President Bob McNally, who has been advising customers for weeks that the probability of conflict is 75%, said this was a “very serious development” for the global oil and gas market given its dependence on production and flows from Hormuz Island.
The bigger issue is duration, industry veterans stressed. McNally said the extent of the oil and LNG price hikes will depend on the duration and extent of disruptions to Gulf Coast production and flows.
Worst-case scenario?: Triple-digit oil prices
Analysts say potential scenarios range from limited disruption to Iranian exports to a full blockade of Hormuz.
The nightmare for world markets is not just the loss of Iranian barrels, but widespread disruption to shipping through the strait.
“Early indications are that there will be a larger attack on Iran, and a counterattack that could escalate to involve multiple Gulf states,” said Saul Kavonic, head of energy research at MST Marquee.
Kavonic said markets would initially price in risks ranging from the loss of up to 2 million barrels a day of Iranian exports to attacks on regional infrastructure or, in extreme cases, disruption of the passage through Hormuz.
“If the Iranian regime feels it is facing an existential threat, we cannot rule out an attempt to block the Strait of Hormuz,” he said, adding that the United States and its allies would likely send military escorts to protect the shipping lanes.
Infographic titled “Strait of Hormuz” created in Ankara, Turkiye on June 17, 2025.
Anadolu | Anadolu | Getty Images
If Iran succeeds in blocking the strait, it could have a serious impact on global oil markets.
“This presents a scenario three times as severe as the Arab oil embargo and Iranian revolution of the 1970s, pushing oil prices into triple digits, while LNG prices could retest their all-time highs in 2022,” Kavonic noted.
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Andy Lipow, president of Lipow Oil Associates, said that although Iranian oil facilities have not been directly targeted so far, the attack significantly increases the risk of disruption to regional oil supplies.
Lipou described the worst outcome as “an attack on Saudi oil infrastructure and the subsequent complete closure of the Strait of Hormuz.” He estimates the probability of that scenario at about 33%, given that Iran may feel cornered.
