How has the conflict impacted global energy and oil markets?

Strait of Hormuz Bottlenecks: Shipping through the Strait of Hormuz—a vital maritime corridor—came to a virtual standstill in the opening days of the war, stalling 150 freight ships, including numerous oil tankers. The ensuing "dual blockade" and escalation forced Iran, which only possessed 13 days of oil storage capacity, to shut down its oil fields, risking permanent damage to them.

Systematic Targeting of Energy Infrastructure: Both sides repeatedly struck critical energy hubs:

Iranian and Israeli Sites: Israeli airstrikes targeted Iranian oil storage facilities and fuel depots, causing massive fires in Tehran. The US and Israel also coordinated attacks on the South Pars natural gas field and neighboring refineries. Additionally, the US launched a massive air campaign on Kharg Island, which handles 90% of Iran's oil exports. In retaliation, Iranian forces hit Haifa oil refineries in Israel.

Depletion of Strategic Reserves: To manage the price spikes, the United States drew heavily on its emergency stocks, causing the US Strategic Petroleum Reserve to drop to its lowest level in four decades, which risked permanently damaging its storage caverns.

Shifts in Global Trade: Due to the instability in West Asia, global trade flows shifted rapidly. For example, the US share of India's LPG imports surged to over 50% in just six months as Indian buyers sought alternatives.

Environmental and Corporate Policy Consequences: The massive price spikes generated a surge in profits for global oil companies. This financial windfall pushed companies to expand production beyond the targets set by the Paris climate agreement, which analysts project could lead to a 2.9°C global temperature increase.

Consumer and Economic Burdens: In the US, the conflict led to elevated inflation and a rising cost of living. By mid-July 2026, American consumers had paid over $68 billion in extra costs for gas and diesel.