[Market Brief] Middle East Situation Out of Control: Four Key Turning Points After Oil Prices Break $100!

What we want you to know:

As the US-Iran war enters its second week, the conflict shows no signs of easing and continues to escalate. Brent and WTI futures prices have both risen to triple digits, fueling market concerns about inflation. Global stock markets are also under pressure. Therefore, after releasing a quick analysis report on the Middle East conflict last week, we are further updating the latest developments in the US-Iran clash this week. We compare it with the 2022 Russia-Ukraine conflict to assess potential future inflation and interest rate trends, and organize four major directions to watch moving forward.

Key points of this article:

2. US-Iran Situation Update: The conflict is increasingly entering a “survival mode” pessimistic scenario, with energy production facilities attacked and the Hormuz Strait nearly shut down. Brent and WTI oil prices have both surged past $100, entering a disorderly rise phase.

3. 2026 US-Iran War vs. 2022 Russia-Ukraine War: Although both involve supply shocks, there are three major differences that provide some buffer for this impact compared to the Russia-Ukraine conflict.

4. Looking Ahead: How much the recent oil price surge impacts inflation and global demand depends on the duration of the conflict. We highlight four key concerns that will determine whether the Middle East conflict turns into a prolonged war!

Given the ongoing expansion of the US-Iran war, we will consolidate related content here: Blog - US-Iran War!

1. US-Iran Gradually Entering “Survival Mode,” Oil Prices Break $100 for the First Time in Four Years!

Hormuz Strait: You Shall Not Pass!

The most critical energy chokepoint in the market—Hormuz Strait, which handles over 20% of global oil shipping trade—normally sees over 100 ships passing daily. However, Bloomberg data shows that last week only 6 oil tankers and 1 LNG vessel left the Persian Gulf. As mentioned in our recent quick report, shipping in the region has effectively halted due to factors like shipping companies suspending operations, tanker charter costs soaring (> $500,000/day), Lloyd’s / London P&I clubs canceling war risk insurance, and GNSS signal interference/deception. This has led to actual disruption of shipping in the area, aligning with the pessimistic scenario we discussed in the previous report.

Because exports through Hormuz are nearly blocked, Middle Eastern oil-producing countries are facing a critical point of “being forced to cut production” due to storage capacity limits. According to energy consultancy Kpler, the buffer days for oil storage are extremely tight: Iraq has less than 5 days, while Saudi Arabia and the UAE have about 20 days remaining. We are also beginning to see signs of production cut pressures, such as Iraq’s Rumaila field (1.5 million barrels/day) and Kuwait (2.5 million barrels/day) announcing reductions. Although Saudi Arabia and the UAE have alternative pipelines, ADNOC (Abu Dhabi National Oil Company) has indicated it is starting to “manage” offshore field capacity to cope with storage needs, showing reserves are also depleting. The Yanbu port on Saudi Arabia’s west coast near the Red Sea has a processing capacity of only about 5.5 million barrels per day. Overall, the daily flow of Middle Eastern crude oil—up to 8.1 million barrels (about 8% of global supply)—may face supply loss risks.

Middle Eastern Neighbors Are Not Safe Either; Energy Infrastructure Still Targeted

Unlike the June 2025 Iran-Israel conflict, this time even energy infrastructure is not spared. The table below summarizes Iran’s recent week of attacks, including over 5 international oil tankers, Saudi Ras Tanura refinery, Qatar Ras Laffan LNG export facilities, and commercial ports in the UAE/Oman. The US-Israel coalition also carried out weekend airstrikes on multiple energy infrastructure sites in Tehran, including large oil depots and military refineries in Shahram, Shahr Ray, and Noubarnia. Axios reports that the Trump administration is considering controlling Halek Island, which accounts for 90% of Iran’s oil exports. Disruption there could further impact approximately 1.5 million barrels per day, primarily affecting Chinese refineries.

Timeline of Key Events: Oil Price Milestones

Researcher Summary:

As the US-Israel-Iran war enters its tenth day, the market is increasingly aware of the scale and potential prolongation of the conflict, exerting significant upward pressure on oil prices. On March 9 (Monday) after Asian markets opened, oil prices surged again, with Brent and WTI approaching $120 per barrel—breaking the $100 mark for the first time in four years. The surge only slowed after the Financial Times reported that G7 countries would coordinate to release 300-400 million barrels from strategic reserves (SPR).

We believe the market is in a panic-driven disorder: The Oil Volatility Index (OVX) broke above 100—an extreme level only seen during the 2008 financial crisis and the 2020 pandemic crash. The call skew was also significantly right-biased, indicating collective hedging against rising prices. Once prices breach key levels, market makers mechanically initiate “Delta hedging,” accelerating price spikes similar to the sharp volatility seen in gold and silver at the end of January. Additionally, the deep backwardation structure with a 24 USD/barrel spread between near and far month prices reflects extreme concern over “immediate supply disruptions.” We will discuss the actual impact of the US-Iran conflict in the next section.

2. Market Analysis: 2026 US-Iran War vs. 2022 Russia-Ukraine War

The current US-Israel-Iran conflict has triggered a full-scale Middle East war, naturally reminding markets of the 2022 Russia-Ukraine war, which rapidly reignited inflation fears. We compare the current situation with the previous Ukraine conflict, summarizing similarities and differences.

Oil Supply Shock, Hormuz Strait Impact More Severe Than Russia-Ukraine!

In 2022, Russia was a major global energy supplier, accounting for over 10% of oil and 15% of natural gas global supplies. The Russia-Ukraine war caused energy prices to surge sharply. From February 2022 to the peak that year, Brent crude and Dutch TTF natural gas futures rose over 40% and 330%, respectively.

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Click questions to have MM AI answer you

What is the background and current situation of the US-Iran war?
💡 As the US-Iran war enters its second week, the conflict continues to escalate. Brent and WTI futures prices have both risen into triple digits, market inflation fears are intensifying, and global stocks are under pressure. The conflict is increasingly entering a “survival mode” pessimistic scenario, with energy infrastructure targeted and the Hormuz Strait nearly shut down.

What impact does the Hormuz Strait disruption have on oil supply?
💡 The Hormuz Strait previously handled over 20% of global oil shipping. Shipping has now effectively halted, pushing Middle Eastern oil producers to the brink of forced production cuts. Up to 8.1 million barrels per day (about 8% of global supply) of Middle Eastern crude oil flow may face supply loss risks.

How does this US-Iran war differ from the 2022 Russia-Ukraine conflict?
💡 Both involve supply shocks, but the Hormuz Strait impact is more severe than the Russia-Ukraine conflict. The key difference is that in 2025, the global oil market was oversupplied, monetary policy remained restrictive, and large capital expenditures on AI infrastructure provided some buffer for this impact.

Will rising oil prices delay Fed rate cuts?
💡 As long as oil prices stay above $70 per barrel, the Fed’s rate cut timeline will be pushed back to after September. In the March meeting, the Fed is likely to focus on inflation risks and adjust rate expectations accordingly, with global central banks also following suit.

Is Iran’s military capability nearing exhaustion?
💡 According to US Central Command, Iran’s missile launches have decreased by over 90% from their peak. With missile capabilities limited, drone attacks are becoming sporadic counterattacks. Iran still has the ability to conduct long-term attrition warfare with low-cost drones, and the conflict may shift toward medium- to low-intensity standoffs.

Will Middle Eastern countries openly oppose and demand an end to the conflict?
💡 About 90% of water in the Middle East depends on desalination, and 80-90% of food relies on imports. If the conflict worsens food security and water resources, Middle Eastern countries may pressure Washington to reduce military strikes and return to diplomatic negotiations for self-preservation.

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