Analyst: Oil prices could hit $100/bbl as strait of Hormuz traffic halts
Analysts are warning that the US-Israel war with Iran could drive oil prices up to $100 a barrel.
Consultancy firm Wood Mackenzie is warning that higher oil and gas prices are certain, and that oil prices could potentially exceeding $100/barrel if tanker flows through the strait of Hormuz are not quickly restored.
They say tanker traffic has been effectively halted, after Iran warned shipping away from the waterway and insurers withdrew coverage.
In the current scenario, oil prices over US$100/bbl are possible if transit flows are not re-established quickly, according to Alan Gelder, SVP of Refining, Chemicals and Oil Markets at Wood Mackenzie.
Gelder explains:
“The key question is when do vessels re-establish export flows.
“No doubt, tanker rates and insurance will increase dramatically, but these costs would only be a small part of the oil price impact associated with a curtailment of oil flows if they last for more than a few days.”
Even in the optimistic scenario where Iran cooperates with the US, it could take a few weeks for export flows to re-establish themselves, Gelder added, saying:
“During that time, oil prices are heavily risked to the upside.
The most recent comparison is during the early days of the Russia/Ukraine conflict, when the fear of loss of Russian supplies drove the oil price to over US$125/bbl.”
Brent crude last traded as high as $100/barrel in 2022, early in the Russia-Ukraine war.
Key events
If the oil price hits $100 a barrel, or more, it would push up inflation and weaken growth.
According to Maurizio Carulli, global energy analyst at Quilter Cheviot, a $10/barrel change in the oil price can add 30-40 basis points (0.03 to 0.04 percentage point) to consumer inflation indexes, and shave off 10-30 basis points from global GDP growth.
Today, Brent crude has gained $5.50 to $78.42 per barrel.
Carulli says:
“Oil supply and demand fundamentals until Friday had pointed at a surplus in 2026, however, that is quickly changing as events in the Middle East play out. Recent weeks had seen the oil price rise from $60/bbl at the beginning of January to $72/bbl on Friday, with it climbing further today to $80/bbl as markets factor in the increased geopolitical risk.
“Depending on how, and for how long, the current military action will continue, the oil price will adjust quite quickly. So, if the situation will calm down over the next few weeks, as it is well possible, the price is likely to revert to $60-65/bbl, given oil production is in excess of demand, and Opec+ has some spare capacity to increase production further. And, vice versa, if the situation precipitates into a wide-spread and prolonged Middle East war, with shipping across the Strait of Hormuz halted, then the oil price could feasibly rise to $100/bbl and above.”
Christian Schulz, chief economist at AllianzGI, says markets face a significant – but not yet destabilising – shock after the US and Israel launched strikes against Iranian military targets.
Much depends on whether the conflict spills into broader regional or domestic instability, Schulz says, adding:
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US and Israeli airstrikes and Iranian attacks in retaliation have raised the risk of a full-scale Middle East war
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The death of Iran’s supreme leader raises the chances of regime change along with protracted instability in Iran and may reduce the risk of a sustained regional conflict.
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Markets will likely demand a higher premium, at least temporarily, until clarity emerges on Iran’s internal stability and the intentions of its geopolitical partners.
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We think oil prices will likely rise even if a sustained closure of the Strait of Hormuz remains unlikely for now; in broader financial markets, US Treasuries, the US dollar and gold may gain, while equities may see a sharp but potentially short‑lived sell-off.
RAC: How higher oil prices could hit drivers
RAC head of policy Simon Williams has crunched the impact on higher oil prices at petrol and diesel pumps:
“While the conflict in the Middle East undoubtedly has the potential to push up pump prices in the UK, it’s not a certainty. The oil price would have to rise significantly and stay that way for some time to have a dramatic effect.
“Forecourt prices were already on the rise due oil trading nearer to $70 a barrel in the last few weeks. Regardless of the current situation, petrol rose by a penny a litre in February and is likely to go up by another penny in the next week or so to an average of 134p a litre.
“If oil were to climb to and stay at the $80 a barrel mark, then drivers could expect to pay an average of 136p for petrol. At $90, we’d be looking at over 140p a litre and $100 would take us nearer to 150p, but it’s all too soon to know.”
The losses in London, Frankfurt, Paris, Milan and Madrid today have pulled the pan-European Stoxx 600 share index down to a two week low.
The Stoxx 600 is down 1.4% so far today, at 624.94 points, falling away from the record highs seen last week.
The eurozone is the major economy that is most exposed to the Iran crisis, Dutch bank ING says.
In a new research note, ING explain that military action in the Middle East could have significant implications for the global economy and markets.
Those “macro consequences” will hit hardest in Europe, where the timing could not be worse.
They write:
The eurozone was finally emerging from its long period of stagnation, with tentative green shoots of recovery emerging – though recently, these have been undermined by new uncertainty regarding tariffs. Now the region could face an energy shock on top of a trade shock.
Europe imports essentially all of its oil and a significant share of its LNG. A surge in energy prices and potentially even energy supply disruption could bring back memories of the energy cost crisis from late 2021 to 2023. There are currently two important differences compared with the situation back then: Europe doesn’t have to ‘derisk’ from a single important energy provider; and the oil price crisis comes at the end of the winter, not the start.
This puts the European Central Bank in “a genuine dilemma”, ING add:
Services inflation is still sticky, and an oil shock would push headline inflation higher – yet the growth outlook is simultaneously deteriorating under the combined weight of tariffs, uncertainty, and now energy costs. Back in December, an ECB analysis showed that a 14% increase in oil prices would push up inflation by 0.5ppt and could reduce GDP growth by 0.1ppt.
However, this would only be the price effect, not the supply chain disruption effect. Given the still relatively fresh memories of the recent inflation surge, the ECB is unlikely to see any new oil price-driven inflation spike as transitory or even deflationary. However, to see a rate hike, the eurozone economy would have to show clear resilience.
Benchmark European diesel refining margins rose nearly 25% on Monday, to their widest since November 20, as the U.S.-Iran conflict disrupted supplies in the Middle East, Reuters reports.
Margins traded at $30.75 a barrel this morning, up by nearly $6, after hitting a session high of $33.76 earlier.
Analysts at ABN Amro predict that the rise in the oil price will have a bigger impact on inflation rather than growth.
They have drawn up three inflation scenarios, covering Brent crude at $80/barrel (roughly its current level), $100 and $130 per barrel.
In the latter scenario, US inflation approaches 4% this year – double the Federal Reserve’s target.
ABN Amro say:
Already facing above target inflation, higher oil prices put the Fed in an even more difficult situation. Headline inflation will rise substantially, while core inflation, which excludes energy prices, barely moves. The usual policy response, which remainsthe most likely for now, is therefore to look through the oil price shock, seeing as it’s a one-off inflationary impulse.
In the current setting, things are more complicated, because the scenario of oversupply with falling energy prices provided a tailwind in headline inflation, which could be used to argue in favour of rate cuts. Higher energy prices, and a resurgence of inflation,could very well tilt the already fragile balance in the FOMC towards holding rates, on the fear of inflation expectations becoming de-anchored, even if the shock is temporary. For our base case to alter, we would need to see, or expect, sustained higher oil prices. Signs of inflation de-anchoring would put a nail in the coffin for rate cuts this year.
Turning to the eurozone, in the mildest scenario(Brent $80), inflation goes from being well below the ECB’s 2%target to moving broadlyback to target and staying there. Even in the mostsevere (Brent $130) scenario, while eurozone inflation is boosted by1.3pp in 2026, the lasting impact is relatively mild, with 2027 inflation only 0.2pphigher.
UK manufacturing kept growing in February
Tom Knowles
British manufacturers enjoyed another strong month in February, according to a closely-watched survey, with firms reporting a rise in new business both at home and abroad.
The S&P’s purchasing managers’ index, which measures activity in the private manufacturing sector, came in at 51.7 in February, which was a very slight fall from 51.8 in January, but still one of the best readings since August 2024. Any reading above 50 represents growth.
The monthly survey of about 650 manufacturers showed new export orders rising at the quickest pace in four-and-a-half years in February, while optimism about the year ahead stayed close to January’s recent high, with close to three-fifths of all companies expecting to expand production during the coming year. Factories reported receiving a higher volume of orders from mainland China, the EU, Middle East and the US.
However, several firms remained cautious, citing uncertainty regarding future government policy and “ongoing geopolitical and global trade tensions.” The survey was conducted before the US-Israel war with Iran began and concerns about exports and cost inflation are only likely to increase next month.
Job losses were also registered for the sixteenth successive month, although at the smallest level during that sequence, and input costs rose to a six-month high, which manufacturers passed on to customers in the form of higher prices, with average output charges increasing for the third month in a row.
Professor Costas Milas, of the management school at the University of Liverpool, says the rise in oil price means the Bank of England will probably maintain interest rates at their current levels for longer, rather than cutting.
Here’s why:
Rachel Reeves and the BoE are (still) hoping for inflation to revert back to the target before May. The latest geopolitical developments might challenge this. From the plot below, CPI inflation correlates positively with global supply pressures.
Global supply pressures precede CPI inflation which, unfortunately, is already happening! Both global supply pressures and an (imminent) increase in the price of oil are exogenous factors with strong predicting power for UK inflation.
Since the BoE can do nothing about these exogenous sources of inflation, it looks more likely than not that (as things stand) Bank Rate will remain at 3.75% for longer.
Reuters are reporting that cruise operator MSC is keeping its Euribia ship in the port of Dubai, due to the Iran conflict.
MSC CRUISES: FOLLOWING GUIDANCE OF REGIONAL U.S. MILITARY AUTHORITIES TO KEEP MSC EURIBIA SHIP IN PORT OF DUBAI
— CGTN Europe (@CGTNEurope) March 2, 2026
MSC add that they are actively in contact with embassies and foreign offices to ensure they have relevant information about their nationals on board and to understand any repatriation plans being developed.
UK mortgage approvals hit two-year low
Away from the Middle East, the UK’s housing market slowed at the start of 2026, new data shows.
The Bank of England has reported that 59,999 new mortgages were approved in January, the lowest since January 2024.
That slowdown came despite a drop in the ‘effective’ interest rate on new mortgages, which fell to 4.09% in January from 4.15% in December.
Net borrowing of mortgage debt by individuals decreased to £4.1bn in January, down from £4.5bn in December, and below the previous 6-month average of £4.5bn.
Gold, a traditional safe haven in times of turmoil, has hit a one-month high today.
Gold is up 2.2% at $5.392 an ounce, having hit its highest level since 30 January this morning.
Susannah Streeter, chief investment strategist at Wealth Club, says:
Precious metals prices have ratcheted up again, with gold and silver increasingly sought after in these turbulent times. Gold has reached a one-month high, after recording its seventh consecutive monthly gain in February – the best winning streak since 1973. Back then, a severe oil shock led to a flight to safe havens. While oil prices have increased sharply, this is not yet mirroring the 1970s surge, when prices effectively quadrupled in just a few months after Gulf countries retaliated against US support for Israel in the Yom Kippur War.
However, with tensions escalating and uncertainty so high, it is far from clear how this current conflict will evolve, and prices could climb even higher. This time around, other worries are also colliding to push up precious metals prices, including high debt levels, concerns over the Federal Reserve’s independence, and questions about the sustainability of the artificial intelligence boom.
Travel company shares across Europe are falling sharply, as the US-Israel war with Iran disrupts flights and deters people from travelling to the region.
Shares in TUI, Europe’s largest travel company, dropped 7% in early trade, while British Airways-owner IAG are now down 5.5%, having initially lost 9%.
Lufthansa and Air France-KLM both fell 7%, while in London cruise operator Carnival is down 7.1%.
Wall Street is on track for losses when trading begins in New York in under six hours.
Victoria Scholar, head of investment at interactive investor, says:
“US futures are pointing to notable declines at the open on Wall Street with Nasdaq futures down around 2% and S&P and Dow futures down around 1.5% each.”
Europe’s bank stocks are down 3.9% so far this morning, on track for the biggest one-day drop since Donald Trump announced sweeping tariffs in April 2025.
Generali Investments: A fast escalating Gulf crisis may lead oil to above $100 a barrel
Paolo Zanghieri of Generali Investments also fears that “a fast escalating Gulf crisis” may push oil above $100 a barrel.
Currently, Brent crude is up 9.5% today at $79.85 a barrel.
Zanghieri says reopening the strait of Hormuz to traffic is the key to preventing prices spiking higher:
“The coordinated attacks by Israel and US on Iran are explicitly aimed at regime change and will likely last much longer than the limited action seen in 2025, when Brent briefly exceeded 80US$/barrel.
Iran has retaliated by targeting Israel, US bases in Gulf states, and closing the Strait of Hormuz, while Houthi rebels pledged renewed attacks in the Red Sea. This escalation is meant to pressure Gulf states to seek de-escalation. Iran’s Kharg Island oil terminal was attacked, but Gulf states’ infrastructure remains untouched.
Closing Hormuz could cut around 15–20% of global oil output. OPEC+ decided to boost supply by 206,000 b/day, and spare capacity (just under 3 million b/day) could theoretically offset lost Iranian exports (1.6 million), while OECDE reserves are well within the normal range. Yet, preventing oil prices from breaching US$100/b depends on reopening Hormuz.
The Iranian navy is likely too weak for a full blockade, but partial disruption obtained through sporadic attacks to ships and mining the Strait could push prices to US$90 or above. Direct strikes on Gulf oil facilities would sharply raise prices but also compromise Iran’s already weak regional ties and upset China.”
UK gilt yields rise as Middle East conflict rages
UK government borrowing costs are rising today, as investors trimmed their expectations for Bank of England interest rate cuts.
The yields, or interest rates, on short- and longer-dated gilts have risen by between 3 and 4 basis points in early trade.
