Oil Prices Surge 7% Amid Israel-Iran Air Strikes and Strait of Hormuz Fears

Oil prices soared Friday as escalating military tensions between Israel and Iran sparked fears of supply disruptions from the Middle East. Brent crude surged 7.02% to settle at $74.23 per barrel, after briefly hitting $78.50—its highest since January 27. U.S. West Texas Intermediate (WTI) crude climbed 7.62% to $72.98, peaking intraday at $77.62. Both benchmarks posted their largest one-day gains since Russia invaded Ukraine in 2022.

The spike follows Israel’s announcement of strikes on Iran’s nuclear sites and missile facilities in a bid to halt Tehran’s atomic ambitions. Iran vowed retaliation and later fired missiles into Tel Aviv, according to reports. The clashes have intensified investor concerns over oil flows through the Strait of Hormuz, a strategic waterway through which nearly 20 million barrels of oil and fuel—about one-fifth of global consumption—pass daily.

Analysts warned that any further escalation targeting energy infrastructure could trigger a tit-for-tat cycle. Iran’s Kharg Island, the hub for 90% of its crude exports, remains untouched, but experts caution this may change. Iran produces about 3.3 million barrels per day, exporting over 2 million. OPEC’s spare capacity is estimated to match Iran’s output, offering some buffer against potential supply shocks.

Despite the unrest, Iranian oil refining and storage facilities remain operational, according to state officials. Meanwhile, the number of active U.S. oil rigs fell to 439—the lowest since October 2021—continuing a seven-week decline, as per Baker Hughes data.

Market reactions extended beyond oil. Equities fell, while gold, the U.S. dollar, and the Swiss franc gained on safe-haven demand. Hedge funds also increased long positions in U.S. crude, CFTC data showed, signaling bullish sentiment amid geopolitical uncertainty.