Oil Market Outlook: Why Prices Defy Expectations Amid Iran Conflict

Global oil markets are grappling with a historic supply shock following the outbreak of war between the United States, Israel, and Iran, yet prices have remained unexpectedly lower than analysts predicted at the start of the conflict.

The conflict, which began on February 28, 2026, with joint U.S.-Israeli strikes against Iran, led to the immediate closure of the Strait of Hormuz. This action took 14 million barrels of oil per day offline, marking the largest supply disruption in history, according to reporting by CNN Business.

The Pricing Paradox

Despite the severity of the supply loss, oil prices have not reached the levels many experts anticipated. While Brent crude surged more than 55% since the start of the war—jumping from approximately $72 a barrel on February 27 to a peak of nearly $120—current trading levels have hovered around $110, with gasoline prices at $4.30, according to CNN Business.

At the outset of the war, analysts expected oil to reach $150 per barrel. Some more aggressive forecasts suggested prices could climb even higher.

I would have expected prices to be above $200. It’s crazy.

Matt Smith, lead oil analyst at Kpler

Factors Buffering the Market

Market analysts point to several factors that have prevented a total price collapse or an ascent to $200 per barrel. A significant supply buffer existed before the war, with JPMorgan reporting that 580 million barrels of crude were sitting in onshore warehouses and on tankers.

Additional relief came from the historic release of strategic reserves and the Trump administration’s decision to de-sanction Russian and Iranian oil. According to Natasha Kaneva, head of global commodities strategy at JPMorgan, these combined efforts have plugged the supply gap by approximately 8 million barrels a day.

Demand destruction has also played a role. JPMorgan data indicates that demand for oil has fallen by at least 4.3 million barrels per day. For context, demand destruction during the 2009 global financial crisis was only 2.5 million barrels per day.

Timeline of Market Volatility

The oil market has experienced extreme swings since the conflict began:

• February 28: Joint U.S.-Israel strikes kill several key Iranian officials, including Supreme Leader Ayatollah Ali Khamenei.
• March 2: Energy exports from the Middle East halt as Tehran attacks ships and energy facilities, closing navigation in the Gulf.
• March 8-9: Brent crude surges toward $120 a barrel as Iranian oil facilities are hit and UAE, Iraq, and Kuwait cut output due to storage limits.
• March 18: Prices surge further after Israel attacks the South Pars gas field and Iran retaliates by striking the Ras Laffan facility in Qatar.
• March 23: Brent dips below $100 per barrel following reports that the U.S. And Iran were discussing an end to the war.

Outlook for Future Pricing

Despite the current plateau, financial institutions warn that the market may still be underestimating the long-term impact. JPMorgan strategists have indicated that oil prices still have room to rise, suggesting that the current “math” of the market is off and that prices could spike again if the Strait of Hormuz does not reopen soon.

The International Monetary Fund has warned that the global oil shortfall caused by the war could potentially tip the world into a recession, as high energy costs exacerbate affordability issues for consumers and businesses.