The Persian Gulf woke before dawn to the glow of burning tankers.

By the time London’s oil traders logged their terminals on Thursday morning, Brent crude futures had surged 6.2% to $97.66 a barrel at around midday London time, after earlier breaching the $100 threshold CNBC — a psychologically devastating milestone that analysts had warned of since the first U.S. and Israeli bombs fell on Iranian territory thirteen days ago. Brent is now up approximately 38% over what it cost when the war started on February 28. Spectrum News 1 For the global economy, still nursing the wounds of post-pandemic inflation, the arithmetic is brutal.

This is no longer a regional skirmish. It is a systemic energy shock of a kind not witnessed since the Arab oil embargo of 1973 — and, on several metrics, already surpassing it.

The Anatomy of Thursday’s Attacks: From Basra to Dubai Creek

Three ships were hit by unknown projectiles in the Persian Gulf early Thursday, according to the United Kingdom Maritime Trade Operations Center. One container ship was struck off the coast of Jebel Ali, United Arab Emirates, causing a small fire onboard. Two tankers were also hit near Al Basrah, Iraq, and were set ablaze — though all crew members were reported safe. UPI

Iran’s Islamic Revolutionary Guard Corps claimed one of those strikes with characteristic theatricality. IRGC footage showed the moment the Safesea Vishnu, a Marshall Islands-flagged vessel, was struck. In the footage, a man can be heard shouting declarations of victory in Khamenei’s name. U.S. News & World Report The vessel’s operators and cargo have not been publicly confirmed, but maritime intelligence sources say it was carrying refined products bound for South Asia.

The strikes on Iraqi waters represent a significant escalation. The two tankers hit near Basra’s southern port area marked the first oil-related strike reported in Iraqi waters since the war began. KPBS Iran, which maintains deep influence over Baghdad, appeared willing to inflict economic pain on a nominal ally — a signal of how far Tehran is prepared to go.

Iran also caused a blaze near Bahrain’s international airport on Muharraq Island, targeted a major Saudi oil field with a drone, and forced Iraq to halt operations at all of its oil terminals. In Kuwait, a drone struck a residential building, wounding two people. In Dubai, firefighters extinguished a blaze at a tower in Dubai Creek Harbour after a drone hit. Washington Times

Iran flouted a U.N. Security Council resolution from the previous day demanding that it halt strikes on its Gulf neighbours. Spectrum News 1 Tehran’s message, delivered not in diplomatic cables but in drone wreckage, was unmistakable: no external legal architecture will constrain its campaign.

The Hormuz Chokepoint: 20 Million Barrels a Day on the Knife’s Edge

The Strait of Hormuz — a 33-kilometre-wide channel between the Iranian coast and the tip of Oman — is the jugular vein of the global oil economy. About 20% of global oil consumption passes through the strait. NPR That is roughly 20 million barrels per day, supplying refineries from Rotterdam to Riyadh to Yokohama.

Iran has not needed a formal naval blockade to achieve an effective halt. By deploying selective drone and rocket attacks, Tehran has been enough to make shipping companies and the insurers who underwrite them balk at the risk of sending ships through the strait, resulting in what amounts to a total halt of tanker traffic. NPR

Strategists noted oil prices were trading higher precisely because there appears to be no end in sight to supply disruptions through the Strait of Hormuz. Dutch bank ING stated in a research note: “The only way to see oil prices trade lower on a sustained basis is by getting oil flowing through the Strait of Hormuz. Failing to do so means that the market highs are still ahead of us.” CNBC

Prices have already demonstrated what “ahead of us” can look like. Brent crude spiked to nearly $120 a barrel on Sunday before retreating NBC News — a foretaste of what a prolonged closure portends.

The IEA’s Historic Intervention — and Why Markets Are Unconvinced

In an attempt to calm markets, the International Energy Agency announced that its member countries will release a combined 400 million barrels of oil from emergency reserves — the largest coordinated stock drawdown in the organization’s history. IEA Executive Director Fatih Birol called the oil market challenges “unprecedented in scale.” UPI

The U.S. confirmed it will release 172 million barrels from the Strategic Petroleum Reserve, roughly 40% of the total, to be released gradually over about four months. KPBS

And yet: oil remains above $95 a barrel. The market’s verdict on the IEA intervention is, politely, sceptical.

The reasons are structural. Strategic stockpiles are held separately by each IEA member country, meaning technical and logistical constraints could slow the flow of barrels. As one analyst noted: “Four hundred million is a big number… but this is the largest oil supply disruption since at least the 1970s, so we need a lot of oil, and we need it quickly.” CNBC

The intervention also carries an inadvertent signal. The very scale of the release — unprecedented in the IEA’s 52-year history — telegraphs the severity of the threat. Releasing 400 million barrels does not inspire calm when markets understand it implies a supply hole that may be measured in billions.

Iran’s Strategic Logic — and the Pressure Calculus

Understanding Tehran’s campaign requires understanding its objective. Iran is attempting to inflict enough global economic pain to pressure the United States and Israel to halt their bombardment, which started the war on February 28. Iran’s president has said its attacks would continue until Iran receives security guarantees against another assault — indicating that even a ceasefire or U.S. declaration of victory might not halt the conflict. Spectrum News 1

Iran’s parliamentary speaker, Mohammad Bagher Qalibaf, threatened that any attempt to take Iranian islands would “make the Persian Gulf run with the blood of invaders,” adding that “the blood of American soldiers is Trump’s personal responsibility.” Spectrum News 1

President Trump, for his part, has sent contradictory signals. He told supporters “we won” but also vowed to “finish the job,” claiming Iran is “virtually destroyed.” NBC News Markets, which require clarity above all, have responded to this ambiguity with volatility.

Iran has been able to load an estimated 18.5 million barrels of oil for shipment since the start of the war, the vast majority from Kharg Island in the Persian Gulf and bound for China U.S. News & World Report — indicating Tehran retains some export capacity even as it attacks its neighbours’ shipping. The asymmetry is deliberate: Iran exports through the Gulf while making the Gulf uninhabitable for everyone else.

Ripple Effects: Insurance, Inflation, and the Hidden Costs

The price of crude is only the most visible wound. The secondary and tertiary effects are spreading through the global economy with the relentless logic of a supply shock.

War-Risk Insurance Premiums have become prohibitive for voyages anywhere near the Arabian Sea. Lloyd’s of London market sources indicate war-risk surcharges have risen by a factor of ten since February 28 for Gulf-adjacent routes. Ships rerouting around the Cape of Good Hope add 10 to 14 days and roughly $1–2 million in additional fuel and operating costs per voyage.

Aviation Fuel Surcharges are already being quietly implemented by Gulf carriers and Asian airlines with heavy Middle East exposure. Jet fuel, which tracks closely to crude oil, has surged in sympathy. Carriers operating long-haul routes through Dubai, Abu Dhabi, and Doha face acute cost pressures.

Fertiliser and Food Prices face an underappreciated risk. The Gulf region is a critical source of sulphur, a by-product of petroleum refining used to produce sulphuric acid and ultimately fertiliser. Disruptions to Gulf refinery output will tighten sulphur markets within weeks, creating a secondary shock to agricultural input costs that will appear in food prices two to three seasons later.

Emerging Market Vulnerability is acute. India and Pakistan — both heavily dependent on Gulf crude — face twin shocks: higher import bills in depreciating currencies and rising food inflation. South Asian central banks that have spent years rebuilding post-pandemic credibility now face a demand for rate increases at precisely the moment their economies are most fragile.

Meanwhile, banks across the region have stepped up precautions after Iran threatened Gulf banking interests linked to the U.S. and Israel. HSBC closed all branches in Qatar until further notice, and Citibank told staff to evacuate offices in the Dubai International Financial Centre. NBC News The financial system, not just the energy system, is beginning to price in sustained conflict.

Three Scenarios: Where Oil Goes From Here

Base Case ($95–110/barrel, 4–8 weeks): Conflict continues at current intensity. The IEA reserve release provides partial relief. Strait of Hormuz remains de facto closed but Iran does not formally announce a blockade. OPEC’s spare capacity — concentrated in Saudi Arabia and the UAE, both now directly under Iranian drone attack — is partially mobilised but logistics constrain delivery. Brent oscillates between $95 and $110. Global GDP growth loses 0.5–0.8 percentage points. Recession risk remains elevated but contained.

Best Case ($75–85/barrel, 6–10 weeks): A U.S.-brokered ceasefire, possibly via Qatari intermediaries, produces a temporary halt. Iran receives informal security assurances. Hormuz reopens to commercial traffic under a naval escort regime. Reserve releases bridge the supply gap. Markets price relief rapidly and overshoot to the downside before stabilising.

Worst Case ($130–160/barrel, 3–6 months): U.S. strikes on Kharg Island — currently the subject of intense speculation — destroy Iran’s primary export terminal. Tehran responds with a formal naval blockade and mine-laying operation in Hormuz. Saudi Aramco’s Shaybah field suffers serious damage. The global economy enters recession. Central banks face their worst nightmare: a stagflationary spiral demanding simultaneously higher rates to fight inflation and lower rates to combat recession.

ING’s strategists have noted that market highs are “still ahead” if the strait remains blocked CNBC — a warning that the $100 threshold breached Thursday may, in retrospect, look like a modest data point on a chart still heading north.

The Geopolitical Dimension: China, India, and Europe’s Scramble

Iranian oil shipments bound for China continued even as Tehran attacked Gulf shipping U.S. News & World Report, creating an extraordinary diplomatic tension. Beijing has deep financial exposure to Iranian crude under long-standing shadow-fleet arrangements, and a genuine interest in seeing the conflict end — but not at the price of publicly endorsing American military objectives.

For Europe, the calculus is different and more immediately painful. The continent spent three years weaning itself off Russian gas after Ukraine; it cannot afford a parallel crisis in its oil supply chains. German industry, already battered by high energy costs, faces a new existential test.

The Kremlin has said discussions are taking place between Moscow and Washington about ways of cooperating to stabilise energy markets reeling from the effective closure of the Strait of Hormuz NBC News — a geopolitical development of stunning irony, given that Russia and the United States remain adversaries across multiple other theatres.

The Bottom Line

Thirteen days into the most consequential Middle East conflict since the 2003 invasion of Iraq, the global energy system is operating without its most critical artery. Brent crude prices spiked to nearly $120 a barrel on Sunday before retreating UPI, and the forces that drove them there — Iranian drone capacity, Hormuz paralysis, infrastructure vulnerability, and political intransigence on all sides — have not diminished.

The IEA’s 400-million-barrel intervention is historic in scale and admirable in coordination. It is also, as markets are making plain, insufficient in isolation. Reserve releases buy time. They do not move tankers. They do not clear minefields. They do not negotiate peace.

Until a diplomatic architecture emerges that can credibly reopen twenty miles of international waterway, every metric of global economic health — inflation, growth, trade, food security — will be held hostage to the glow of burning ships on the Persian Gulf at dawn.