Global energy and commodity markets are thrown into turmoil on Monday after joint US-Israeli military strikes on Iran killed supreme leader Ayatollah Ali Khamenei and triggered a sweeping regional escalation, with Tehran retaliating by closing the Strait of Hormuz, the world's most critical oil chokepoint, and launching drone and missile attacks across the Persian Gulf.
Crude oil prices surged over 7% at Monday's market open. Brent crude futures climbed to US$82.37/barrel, the highest since January 2025, while the US West Texas Intermediate (WTI) futures rose 7.19% to US$71.86/barrel. Just days earlier, Brent had settled at US$72.48/barrel on Friday.
About 20mn (million) barrels of oil, worth around US$500bn (billion) in annual global energy trade, transited through the Strait of Hormuz each day in 2024, according to the US energy information administration. According to
a report from Al Jazeera, Iran's decision to shut the narrow waterway—barely 33km wide at its narrowest point—has effectively paralysed the passage of oil from some of the world's largest producers, including Saudi Arabia, Iraq, Kuwait, Qatar and the United Arab Emirates (UAE).
As a result of the closure, 150 freight ships, including many oil tankers, are stalled behind the Strait.
Shipping giant Maersk announced it had suspended all vessel crossings through the strait and paused Trans-Suez sailings through the Bab el-Mandeb, rerouting some cargo around the Cape of Good Hope. Tanker traffic through the Strait of Hormuz has effectively come to a halt as shipping companies take precautionary measures, according to consulting firm Rystad Energy.
According
to a CNBC report, at least three tankers in the Gulf have been damaged since the US and Israel began trading strikes with Iran. Marine insurers have responded swiftly. "We would estimate that near-term rate increases for Marine Hull insurance in the Gulf could range from 25 to 50%," Dylan Mortimer, marine hull UK war leader at insurance broker Marsh told CNBC, adding that a direct attack on merchant shipping could have "major repercussions across war insurance rates."
Roughly one-fifth of global oil supply passes through the Strait of Hormuz, a vital artery for world trade.
In a meeting planned before the conflict erupted, OPEC+ announced it would raise production by 206,000 barrels a day from April, led by Saudi Arabia and Russia. However, analysts cautioned that the output increase may offer little relief. "The world's spare oil capacity comes from the Gulf states and would be unable to pass through the Strait in the event of a closure, effectively sealing it off from the market,"
Robert McNally of Rapidan Energy Group told CBS News.
UBS analysts told clients that the market may be anticipating a material disruption that sends Brent spot prices above US$120/barrel. Analysts at Brickwork Ratings warned that Brent crude could climb above US$90/barrel with continued Strait of Hormuz disruption, or exceed US$100/barrel in a broader regional conflict.
For India, the fallout is particularly acute. China, India, Japan and South Korea accounted for a combined 69% of all crude oil and condensate flows through the Strait last year. India imports close to 90% of its crude requirements, and over 40% of that supply transits the Strait of Hormuz.
For India, with close to 90% dependence on imported crude, any sustained rise in Brent prices quickly feeds into higher fuel costs, broader inflation and a wider current account deficit.
According to Sehul Bhatt, director at Crisil Intelligence, developments in the Middle East could increase pricing and procurement risks for crude oil and liquefied natural gas (LNG), posing substantial challenges for India which has import dependencies of more than 85% and 50%, respectively, in these items.
"Corporate India faces three key energy risks: crude oil prices have risen above US$75 per barrel and could stay elevated if geopolitical tensions persist, though they may average US$65–US$70 in 2026 if conditions stabilise. A major concern is potential disruption at the Strait of Hormuz, which handles nearly half of India’s oil and LNG imports, as rerouting shipments would increase transit time, freight and insurance costs. While OPEC+ plans a modest output increase from April 2026, limited spare capacity outside Saudi Arabia and the UAE means sustained disruptions could keep crude prices high and tighten LNG supplies, highlighting the need for strategic energy planning," he says.
JM Financial Institutional Securities noted in a research report that every US$1 rise in crude adds about US$2bn to India's annual import bill, placing immediate pressure on the trade balance. Prolonged tensions are also likely to push up logistics and marine insurance costs, disrupt Gulf shipping routes, and weigh on the rupee.
Indian equity markets turned risk-off on Monday, with foreign investor outflows and sharp pressure expected on automobile, financial and energy-intensive sectors.
Precious metals mirrored the crude surge. On the Multi Commodity Exchange (MCX), gold futures for the April contract jumped ₹5,811, or about 3.6%, to ₹167,915/10gm. Silver futures for May delivery soared ₹10,508, or 3.72%, to ₹293,152/kg.
The dollar index climbed 0.24% to 97.85, making greenback-denominated bullion costlier for buyers in other currencies and capping some of gold's upside. The metal's recent rally follows a 64% surge through 2025, propelled by strong central bank buying, robust inflows into exchange-traded funds (ETFs), and expectations of US monetary easing. JP Morgan now forecasts gold could touch US$6,300/ounce by end-2026, while Bank of America sees it approaching US$6,000.
Iran launched retaliatory drone and missile attacks across the Persian Gulf, targeting US military bases in Jordan, Kuwait, Bahrain, Qatar, Iraq, Saudi Arabia and the UAE, as well as striking civilian aviation facilities, including international airports in Kuwait and the UAE. The Yemen-based Houthis also announced they would resume attacks in the Red Sea.
Airlines, including Air India, IndiGo, British Airways, Lufthansa, Virgin Atlantic and Cathay Pacific, suspended services to the Middle East. Dubai International Airport, which reported damage, saw 70% of its flights cancelled.
The geopolitical risk premium would ease only when there is clarity on Iran's new leadership, credible channels for de-escalation and assurance that vital oil routes, particularly the Strait of Hormuz, remain open. Until then, energy markets and investors are bracing for a prolonged period of volatility driven more by geopolitics than by supply-and-demand fundamentals.
