Iran-U.S. Conflict Fuels Global Oil Volatility and Sparks Policy Responses

The war between the United States and Iran has repeatedly disrupted the Strait of Hormuz, a chokepoint that moves a large share of the world’s crude. On June 17, the United States and Iran signed a cease-fire agreement, prompting a brief resumption of commercial shipping and a drop in benchmark oil prices to roughly $70 per barrel. The cease-fire later collapsed, leading the United States to announce a new blockade of Iranian oil and Iran to impose fresh transit requirements for Hormuz traffic.

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• Brent crude climbed to about $120 per barrel, its highest level of the year, after traders warned of a prolonged supply shock. Prices later fell to $70 per barrel following the cease-fire, then rose again to $85 per barrel when the blockade resumed.

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• The International Energy Agency coordinated a historic release of more than 400 million barrels from strategic reserves, covering roughly 20 days of Hormuz-related supply.

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• Production increases: the United States, Venezuela and Norway pumped more crude in the first half of the year than in previous months, redirecting barrels to nations that had relied on Iraqi and Saudi shipments. South Korea doubled its U.S. oil imports between February and April.

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• Demand-side actions: Over 100 countries enacted conservation measures, ranging from four-day workweeks (Philippines, Pakistan, Sri Lanka) to vehicle-driving restrictions (Myanmar) and air-conditioning temperature caps (Bangladesh). China halted purchases for its strategic reserve and shifted electricity generation toward coal and solar, freeing an estimated 5 million barrels per day.

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military superiority. He blamed the deaths of three U.S. In a separate briefing, Trump said the United States would “take care of” any new threats, such as a potential Houthi blockade of Saudi shipping in the Red Sea.

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• “There have been multiple measures taken by governments both on the supply and demand side, but mainly on the demand side for large oil importers,” — Kevin Morrison, analyst at the Institute for Energy Economics and Financial Analysis

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• “Hormuz 1.0 was about supply and inventory,” — Bob McNally, founder of Rapidan Energy Group

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Analysts differ on the likely trajectory of oil prices. Morrison stresses that demand-side conservation will continue to temper price spikes, while McNally warns that depleted strategic reserves and renewed Iranian oil purchases could push prices “really high” as demand remains inelastic. Neither source provides a precise forecast, leaving uncertainty about the timing and magnitude of any future price surge.

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The United States has signaled intent to maintain the blockade of Iranian oil, and Iran has indicated the Strait of Hormuz remains closed. With strategic petroleum reserves dwindling and global demand still robust, experts caution that any prolonged closure could trigger “Hormuz 2.0,” where price mechanisms, rather than inventory buffers, drive market dynamics. Monitoring of U.S. production levels, further emergency releases, and the evolution of demand-reduction policies will be critical in the coming months.

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