Following a targeted US military strike on Iranian nuclear facilities, global energy markets are tense as oil prices surge to their highest levels in five months. The escalation, emphasised by President Donald Trump’s statement that key sites were “obliterated”, has reignited fears over the security of the Strait of Hormuz, a critical chokepoint for global oil shipments. As Iran, OPEC’s third-largest crude producer, grapples with rising tensions, Brent crude has soared to levels not seen since January. The resulting uncertainty has caused significant volatility in financial markets, fueling a flight to traditional safe-haven assets. With growing concerns about potential supply disruptions, investors are now bracing for further price increases in the days ahead.
Path to $110
According to a Reuters report, Goldman Sachs warned that any significant disruption to oil flows through the Strait of Hormuz could lead to significant price spikes, with Brent crude potentially peaking at $110 per barrel if flows were halved for a month and remained down by 10% for nearly a year. In a note published Sunday, the bank also modelled that a loss of 1.75 million barrels per day of Iranian supply could push Brent to a peak of $90 per barrel.
While Goldman projects prices will average around $95 in Q4 2025, it emphasised that the current situation remains highly fluid, and economic incentives for the US and China to avoid prolonged disruption are strong.
Equity markets slip as investors flee to safe havens
Recent tensions rattled global equity markets on Monday as Asian shares slipped and oil prices briefly surged to five-month highs, as investors braced themselves for possible Iranian retaliation following the US airstrikes on its nuclear sites. MSCI’s Asia-Pacific index outside Japan fell 1%, while Japan’s Nikkei dropped 0.6%. Oil rose around 2.8% at its peak, with Brent crude later settling up 1.8% at $78.42 a barrel and U.S. crude gaining 1.9% to $75.26.
Analysts noted that markets showed no signs of panic selling, though geopolitical risk loomed large. “Markets may be responding not to the escalation itself but to the perception that it could reduce longer-term uncertainty,” said Charu Chanana, chief investment strategist at Saxo. However, she warned that any Iranian retaliation or threat to the Strait of Hormuz could swiftly reverse sentiment.
The narrow strait, which handles a quarter of global oil trade, remains a critical chokepoint. JPMorgan warned that previous regional regime change events led to oil price spikes as high as 76%, and Goldman Sachs estimated oil could temporarily hit $110 if the Strait is closed for a month.
Strategic oil reserves
Amid the recent surge in oil prices triggered by escalating tensions in the Middle East, discussions have reignited over whether Washington will release oil from its Strategic Petroleum Reserves (SPR) to help stabilise global markets. While such measures have historically been used to ease price shocks, US officials have not signalled any immediate plans.
The US strike on Iran’s nuclear sites has rattled global markets, sending oil prices soaring to five-month highs and prompting a rush into safe-haven assets. At the center of concern is the Strait of Hormuz, a critical artery for global energy shipments, where any escalation could drive energy prices even higher and deepen market volatility.
