Oil Prices 2026: Inside the Hormuz Crisis That Won’t End

Why are oil prices so volatile in 2026? Nearly every major oil-price swing in 2026 traces back to a single chokepoint: the Strait of Hormuz, through which roughly a fifth of the world’s oil and liquefied natural gas flows, according to Reuters reporting carried by the Express Tribune. Since war broke out between the U.S., Israel, and Iran at the end of February 2026, the strait’s status — open, restricted, or effectively closed — has driven Brent crude through some of the widest swings the market has seen in years.

The Timeline: From $63 to $126 and Back

Featured Snippet Target: Brent crude averaged around $63.85 per barrel in a February 2026 analyst survey conducted just before war broke out; by March, after Iran effectively restricted Hormuz traffic, the same survey’s forecast jumped to $82.85 — a 30% increase representing the steepest one-month forecast revision in the Reuters oil poll’s history since 2005 — with prices briefly touching levels near $126 for Brent and nearly $120 for WTI at the conflict’s most acute phase.

That initial shock was followed by a genuine de-escalation. By late June, Brent fell to $73.76 a barrel — its lowest level since before the Iran war began — after reports emerged that tankers were again passing through Hormuz following a ceasefire, according to Energynomics. J.P. Morgan analysts cut their Brent forecast for the second half of 2026 to an average of $86 in the third quarter and $80 in the fourth, while a broader Reuters poll of 31 economists lowered its full-year 2026 Brent forecast to $84.50 per barrel, down from $90.44 the prior month — the first downward revision analysts had made since the conflict began, driven by the normalization of Hormuz shipping traffic.

Why the Calm Didn’t Last

That de-escalation proved temporary. By early August, oil prices were rising again on renewed concerns over Hormuz’s reopening plans, as Iran — working alongside Oman — proposed banning vessels deemed “hostile” from the strait while imposing heavy fines on rule violators, pushing Brent back up to $83.29 a barrel, according to Reuters coverage. By mid-September, tensions had escalated further still: Brent settled at $104.61 and WTI at $100.05 on September 12, having touched multi-month highs near $107-$109 earlier in the week, driven by renewed maritime security concerns spanning both the Strait of Hormuz and the Red Sea, according to PSU Connect.

That September spike also coincided with tight refining margins pushing derivative products like US diesel to historic highs — a sign that the oil-market stress has been feeding through into downstream fuel costs even during periods when crude itself wasn’t setting fresh records.

The Scenario Analysis That Kept Shifting

Throughout the year, major banks published scenario-based forecasts that essentially functioned as a real-time gauge of how seriously markets were taking the risk of a prolonged Hormuz closure. Goldman Sachs, in an April note, laid out an “adverse view” in which Brent would average above $100 a barrel through the second half of 2026 if the strait remained closed for another month, with a more extreme scenario — involving a longer closure and lost regional production — pushing Brent to $120 in the third quarter and $115 in the fourth, according to Fortune. Barclays similarly raised its 2026 Brent forecast to $100 from $85 in early May, estimating the oil market was running a supply deficit of around 6.6 million barrels per day at the time, a gap the bank warned was likely to widen the longer disruptions continued, according to Kitco.

The Knock-On Effects Across the Global Economy

Oil’s 2026 volatility hasn’t stayed contained to energy markets. Elevated and unpredictable crude prices have been cited repeatedly as a contributing factor behind mortgage-rate stickiness in the U.S. (via broader inflation pressure), the Federal Reserve’s more hawkish policy stance under new Chair Kevin Warsh, and Pakistan’s central bank holding its policy rate steady at 11.5% in September specifically because of “further increase in already elevated global commodity prices” tied to the conflict, according to the State Bank of Pakistan’s official September monetary policy statement. Fitch Ratings has separately pointed to Iran-conflict-driven oil prices as a factor pressuring global mortgage rates and building costs across its 2026 Global Housing and Mortgage Outlook.

The Bottom Line

Oil in 2026 has behaved less like a market responding to steady supply-and-demand fundamentals and more like a real-time barometer of Strait of Hormuz risk — surging past $126 at the conflict’s peak, falling to pre-war lows near $74 during the June ceasefire, and climbing back above $100 by September as tensions resurfaced. Every major bank forecast published during the year has effectively been a bet on how long Hormuz disruptions would last, and each time the strait’s status has changed, those forecasts have needed revising within weeks rather than months.

Next step: Anyone tracking oil-price exposure — whether for investment, business cost planning, or simply understanding inflation’s trajectory — should treat Strait of Hormuz shipping-traffic reports, not headline crude prices alone, as the leading indicator: traffic data has consistently moved days ahead of the price swings themselves throughout 2026.