Why Oil's Future Is So Unpredictable

The oil market has been roiled by the Iran war, with prices swinging wildly as conflict around the Strait of Hormuz disrupts supply and spooks traders. For regions most dependent on Gulf exports, the strain is already apparent, with wider implications on the horizon.

The war in Iran has triggered an unprecedented disruption in global oil markets by effectively halting traffic through the Strait of Hormuz, a narrow waterway that carries roughly a quarter of the world’s seaborne crude. While the conflict has produced a severe humanitarian toll, its economic shockwaves have centered on energy: Brent crude has surged beyond $100 a barrel amid extreme volatility.

The situation is considered unique in the history of Middle East conflicts since Iran has never before sought to fully close the Strait to traffic. Around 6.7 million barrels per day of oil production has been blocked, and the International Energy Agency recently announced a record 400 million-barrel coordinated release from global reserves to stabilize markets. But without a cessation of hostilities and resumption of commercial traffic, efforts to free up supply in other ways may be unlikely to keep prices down.

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