[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 into triple digits, and market concerns about inflation are rapidly intensifying. Global stock markets are also under pressure. Therefore, after releasing a quick analysis report on the Middle East conflict last week, this week we further update the latest situation of the US-Iran clash, compare it with the 2022 Russia-Ukraine conflict and its impact on the markets, assess the possible future trends of inflation and interest rates, and organize four major developments to watch.

Key points of this article:

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

3. 2026 US-Iran War vs. 2022 Russia-Ukraine War: Although both involve supply shocks, there are three major differences between this conflict and the Russia-Ukraine war, providing some buffer space for this shock.

4. Looking Ahead: How much the recent surge in oil prices will impact 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 escalation of the US-Iran war, we will consolidate related content under this category: Blog - US-Iran War!

1. US-Iran gradually shifting into “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 companies have suspended operations in the Persian Gulf, charter rates for oil tankers have soared (>500,000 USD/day), and maritime insurers like Lloyd’s / London P&I clubs have canceled war risk coverage, along with GNSS signal interference/deception, leading to actual disruption of shipping in the region. This aligns with the pessimistic scenario we discussed in the previous report.

Because exports through the Hormuz Strait 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 gradually depleting. The port of Yanbu 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 Middle East’s daily crude oil flow of up to 8.1 million barrels (about 8% of global supply) may face supply loss risks.

Middle Eastern neighboring countries are not immune; energy infrastructure is still being targeted

Unlike the Iran-U.S. conflict in June 2025, this current conflict has also hit energy infrastructure. The table below shows that Iran’s targets over the past week include more than five international oil tankers, Saudi Ras Tanura refinery, Qatar Ras Laffan LNG export facilities, and commercial ports in the UAE/Oman. The U.S.-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 Hark Island, which accounts for 90% of Iran’s oil exports. Disruption there could further impact approximately 1.5 million barrels per day of supply, 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, putting significant upward pressure on oil prices. After Asian markets opened on March 9 (Monday), oil prices surged again, with Brent and WTI approaching $120 per barrel, surpassing $100 for the first time in nearly four years. The surge was only contained after the Financial Times reported that G7 countries would coordinate to release 300-400 million barrels of strategic reserves (SPR).

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

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

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

Oil supply shocks, 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 production. The Russia-Ukraine war caused energy prices to surge sharply. From February 2022 to the peak later that year, Brent crude futures and Dutch TTF natural gas futures rose over 40% and 330%, respectively.

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Click questions to have MM AI answer you

Why is the US-Iran war happening and what is the current situation?
💡 The US-Iran war has entered its second week, with ongoing escalation. Brent and WTI futures prices have both risen into triple digits, market inflation fears are rising rapidly, and global stocks are under pressure. The conflict is increasingly heading toward a “survival mode” pessimistic scenario, with energy infrastructure attacked and the Hormuz Strait nearly shut down.

What is the impact of Hormuz Strait disruption on oil supply?
💡 The Hormuz Strait previously handled over 20% of global oil shipping trade. Shipping has now practically halted, pushing Middle Eastern oil producers to the brink of forced production cuts. Daily flow of up to 8.1 million barrels (about 8% of global supply) may face supply loss risks.

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

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 following suit.

Is Iran’s military capability near exhaustion?
💡 According to U.S. 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 using low-cost drones, and the conflict may shift toward a medium- to low-intensity standoff.

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

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