[Market Brief] Middle East Situation Out of Control: Four Key Turning Points After Oil Prices Break $100!

What We Want You to Know:

As the US-Iran war enters its second week, the conflict shows no signs of easing and continues to escalate. Brent and WTI futures prices have both risen into triple digits, fueling market concerns about inflation. Global stock markets are also under pressure. Therefore, following last week’s quick update on Middle East developments, we are further providing the latest on the US-Iran conflict, comparing it with the 2022 Russia-Ukraine war’s impact on markets, assessing potential inflation and interest rate trends, and highlighting four key future developments to watch.

Key Points:

2. US-Iran Situation Update: The conflict is increasingly entering a “survival mode” pessimistic scenario, with energy infrastructure targeted, the Hormuz Strait nearly shut down, and Brent and WTI oil prices breaking above $100, entering a disorderly surge.

3. 2026 US-Iran War vs. 2022 Russia-Ukraine War: Although both cause supply shocks, there are three major differences that provide some buffer for this impact.

4. Looking Ahead: How much the recent oil price surge affects inflation and global demand depends on the conflict’s duration. We highlight four major concerns that will determine whether the Middle East conflict turns into a prolonged war!

Given the ongoing escalation of the US-Iran war, we are consolidating related content here: Blog – US-Iran War!

1. US-Iran Gradually Moving into “Survival Mode,” Oil Prices Break $100 for the First Time in Four Years!

Hormuz Strait: You Shall Not Pass!

The most critical energy chokepoint—Hormuz Strait, which handles over 20% of global oil shipping trade—has seen actual shipping disruptions. On average, over 100 ships pass through daily, but Bloomberg reports that last week only 6 oil tankers and 1 LNG vessel left the Persian Gulf. As mentioned in our recent quick report, shipping in the region has effectively halted due to factors like shipping companies suspending operations, tanker charter rates soaring (> $500,000/day), Lloyd’s / London P&I clubs canceling war risk insurance, and GNSS signal interference/deception. This has led to a de facto blockade, aligning with the pessimistic scenario we discussed previously.

With exports from Hormuz nearly blocked, Middle Eastern oil producers are facing a critical point of “forced production cuts” due to storage capacity limits. According to energy consultancy Kpler, the buffer days for oil storage are extremely tight: Iraq has less than 5 days, while Saudi Arabia and the UAE have about 20 days remaining. We are also seeing signs of production pressure, such as Iraq’s Rumaila field (1.5 million barrels/day) and Kuwait (2.5 million barrels/day) announcing output reductions. Although Saudi Arabia and the UAE have alternative pipelines, ADNOC (Abu Dhabi National Oil Company) has indicated it is managing offshore field capacity to cope with storage needs, showing reserves are also depleting. The Yanbu port on Saudi Arabia’s Red Sea coast has a processing capacity of only about 5.5 million barrels per day. Overall, the daily flow of Middle Eastern crude oil—up to 8.1 million barrels (about 8% of global supply)—may face supply loss risks.

Middle Eastern Neighbors Are Not Safe Either; Energy Infrastructure Still Targeted

Unlike the June 2025 Iran conflict, this time even energy infrastructure is not spared. The table below summarizes Iran’s recent attacks over the past week, including international oil tankers (>5 ships), Saudi Ras Tanura refinery, Qatar Ras Laffan LNG export facilities, and commercial ports in the UAE/Oman. The US-Israeli coalition also conducted weekend airstrikes on multiple energy infrastructure sites in Tehran, including large oil depots and military refineries in Shahran, Shahr Rey, and Noubarnia. Axios reports that the Trump administration is considering controlling Halek Island, which accounts for 90% of Iran’s oil exports. Disruption there could further impact approximately 1.5 million barrels per day, primarily affecting Chinese refineries.

Timeline of Major Oil Price Events:

Researcher Summary:

As the US-Israel-Iran conflict reaches its tenth day, the market is increasingly aware of the scale and potential prolongation of the conflict, exerting significant upward pressure on oil prices. On March 9 (Monday) after Asian markets opened, oil prices surged again, with Brent and WTI approaching $120 per barrel—breaking above $100 for the first time in nearly four years. The surge was only tempered after the Financial Times reported that G7 countries would coordinate to release 300-400 million barrels from strategic reserves (SPR).

We believe the market is in a panic-driven disorder: The Oil Volatility Index (OVX) broke above 100—an extreme level only seen during the 2008 financial crisis and the 2020 pandemic crash. The call skew (option skewness) is significantly right-biased, indicating collective hedging against further price increases. Once prices breach key levels, market makers mechanically initiate “Delta hedging,” accelerating price spikes—similar to the sharp volatility seen in gold and silver at the end of January. Additionally, the deep backwardation (front-month premium of $24 per barrel) reflects extreme concern over immediate supply disruptions. We will discuss the actual impact of the US-Iran conflict in the next section.

2. Market Analysis: 2026 US-Iran War vs. 2022 Russia-Ukraine War

The current US-Israel-Iran conflict has triggered a full-scale Middle East war, prompting comparisons to the 2022 Russia-Ukraine war, which reignited inflation fears. Here, we compare the current situation with the previous conflict, highlighting similarities and differences.

Oil Supply Shock: Hormuz Strait Impact Greater Than Russia-Ukraine!

In 2022, Russia was a major energy supplier, accounting for over 10% of global oil and 15% of natural gas production. The Russia-Ukraine war caused energy prices to surge sharply: from February 2022 to the peak, Brent crude and Dutch TTF natural gas futures rose over 40% and 330%, respectively.

(Note: The rest of the detailed comparison continues in the original content.)