U.S.-Israeli Strikes Trigger Sharp Increase in Energy Markets

(MENAFN) Global energy markets lurched sharply higher this week as the outbreak of hostilities between US-Israeli forces and Iran sent war risk premiums surging, rattling oil traders and gas suppliers already on edge over months of diplomatic deterioration.

The market's unease had been building well before the first strikes landed. On February 27, US President Donald Trump openly signaled frustration with the pace of nuclear negotiations, remarking that Tehran had not shown a "good-faith stance" in talks — comments that immediately stoked fears of a broader military confrontation and drove Brent crude up 2.8% to approximately $73 a barrel, its highest closing level since June 2025. West Texas Intermediate (WTI) crude followed, gaining 2.6% to $67.17 per barrel on the same session.

Reports of coordinated US-Israeli strikes against Iran surfaced after markets closed on February 28, softening the immediate price shock — but only temporarily.

When trading resumed, crude prices accelerated sharply. By 11:56 a.m. local time (0856 GMT), Brent had surged 8.5% from the prior close to $79.19 per barrel — the highest since January 2025 — while WTI climbed 8.1% to $72.60 per barrel. Market participants are now bracing for further upside, with Asian market openings seen potentially adding more than $10 to crude prices.

Natural gas markets proved equally volatile. European gas prices jumped more than 20% at the start of the week. On the TTF benchmark hub in the Netherlands, April futures changed hands at €40.81 per megawatt-hour around 10:30 a.m. local time (0730 GMT), sharply above the €31.95 closing price recorded on February 27 — the highest level in approximately one year — as the regional security crisis deepened.

Iran's Outsized Role in Global Oil Supply
The scale of the market reaction reflects Iran's considerable weight in global energy supply. As one of OPEC's largest producers, Iran accounts for roughly 4% to 4.5% of global crude output, with production estimated at around 3.3 million barrels per day. Domestic refining capacity stands at approximately 2.6 million barrels per day, according to London-based energy consultancy Facts Global Energy. Data provider Kpler estimates that Iran's fuel exports — including liquefied petroleum gas (LPG) — averaged roughly 820,000 barrels per day last year.

Any sustained disruption to Iranian production would ripple immediately through global supply balances, analysts warn, with spare capacity among fellow OPEC members offering only a partial cushion — one that has been steadily eroding under output expansion policies in recent years.

The Strait of Hormuz: A Global Energy Chokepoint
Compounding supply concerns is the heightened vulnerability of the Strait of Hormuz, the narrow waterway through which roughly 20 million barrels of oil and petroleum products transit daily. Approximately one-third of all globally traded seaborne crude passes through the strait, making it indispensable to exports from Middle Eastern heavyweights including Saudi Arabia and the UAE. The waterway also handles an estimated 20% of global natural gas trade.

Reports of significantly slowed tanker traffic through the strait have added urgency to fears that any military escalation could choke a supply corridor upon which much of the world's energy economy depends — a scenario analysts say would amplify price volatility well beyond current levels.

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