What’s Affecting Oil Prices This Week?

By John E. Paisie, Stratas Advisors

March 02, 2026 11:13 AM CST

The price of Brent crude oil ended the week at $73.21 after closing the previous week at $71.24. The price of WTI ended the week at $67.29 after closing the previous week at $66.49. Oman crude traded near $74.95 for April delivery.

Over the weekend, the oil market was jolted by the attack on Iran carried out by the U.S. and Israel that targeted Iranian leadership and infrastructure. Reports confirm the death of Iran’s Supreme Leader Ayatollah Ali Khamenei in these strikes – along with many other senior officials and military leaders. Iran’s retaliation included missile strikes toward Israel and attacks across the region, including in the UAE, Bahrain, Kuwait, Qatar and Saudi Arabia, coupled with warnings to shipping and disruptions/blockages reports in the Strait of Hormuz.

On March 2, Brent jumped intraday to highs near $82 (a 14-month peak) before easing to around $77, while WTI rose to around $71. The spike reflects weekend U.S.-Israeli strikes on Iran, retaliatory actions, and the de facto halt in Strait of Hormuz transits.

Impact on Iranian oil

Iran has been producing around 3.3 MMbbl/d of crude oil and 1.3 MMbbl/d of condensate and other liquids – in total around 4.6 MMbbl/d. From these volumes, Iran has been exporting around 1.4 MMbbl/d of liquids (predominantly crude oil and condensate) with more than 90% going to China. The independent refineries in Shandong province are the main buyers of Iranian oil, with the transactions being done outside of the U.S. dollar system and the transportation being handled by a shadow fleet.

There have been reports that U.S.-Israeli strikes have severely damaged Kharg Island (primary terminal for around 90% of exports, including much condensate routing), with near-total loss of loading capacity (jetties, tanks, pipelines destroyed and fires/secondary explosions reported). If so, the required repairs could take months – possibly as long as 18-24 months – and during that time, Iranian exports (crude and condensate) would be reduced by more than 1 MMbbl/d. 

An intentional strike and subsequent damage, however, have not been confirmed by independent sources. Skepticism is warranted since an attack on Iranian oil export facilities would contradict past restraint by the U.S. because of concerns of oil price surges, as well as being cross purpose with supporting a viable post-regime transition. Regardless, at the time of this writing, there is no movement of Iranian oil through the Strait of Hormuz.

Response from OPEC+

In the aftermath of the initial attacks, OPEC+ (at a previously scheduled meeting on Sunday, March 1, 2026) decided to start on April 1 with increasing oil production by 206,000 bbl/d, which ends the three-month pause. This increase compares to 137,000 bbl/d that had been the monthly increase before the pause. OPEC+’s next meeting is April 5, 2026. 

The increase, however, pales in comparison to the lost supply from Iran. Additionally, oil flow through the Strait of Hormuz has slowed substantially, with a drop in transit of around 70%, with tankers anchoring outside the strait because insurers are canceling coverage or raising premiums, coupled with Iran’s threats. This is affecting oil supply from other Gulf suppliers (with typical flows through the Strait of Hormuz).

• Saudi Arabia: 5.5 Mbbl/d;
• UAE: 2.1 MMbbl/d;
• Kuwait: 1.6 MMbbl/d; and
• Iraq: 3.3 MMbbl/d

The UAE, Kuwait and Iraq have no alternative means to move their oil exports. Saudi Arabia has the East-West pipeline that can move around 5. MMbbl to the Red Sea, but has been vulnerable to attacks. The UAE has the Habshan-Fujairah pipeline with a capacity of around 1.5 MMbbl/d to the Gulf of Oman. Besides the above volumes of crude oil, there is another 5-7 MMbb/d of refined products being shipped through the Strait of Hormuz, with much of the volumes going to Asia.

Impact on supply/demand

The overall result is a much tighter oil market in terms of supply and demand, along with a higher risk premium. Our view has been that oil prices would spike to $100/bbl if there is a material impact on the flow of oil, and this war is doing so, and could do so for a while. At this point, it looks like the U.S. and Israel will knock out Iran’s ability to put up any organized military response in short order – so the Strait of Hormuz could be opened with normal traffic in a week or so – and even sooner if Iran agrees to capitulate quickly to U.S. and Israeli demands.

This timeline, however, is likely to be overly optimistic for several reasons. First, it appears to be in Israel’s best interest to keep the military action going longer to destroy more of Iran’s military capabilities. Secondly, while Iran appears to be taking significant damage, with the U.S. and Israel having total air superiority, Iran is a vast country (about 2.5 times the size of Texas), which provides space to hide launchers, plus Iran still has proxies in the region, and while diminished, can make transit through the Strait of Hormuz risky.

The supply situation is further aggravated by the lack of spare capacity that does not transit through the Strait of Hormuz. Currently, almost all spare capacity resides with Saudi Arabia (around 1.80 MMbbl/d) and the UAE (around 700,000 bbl/d). The rest of OPEC+ members (including Iraq, Kuwait, and Russia) have minimal spare capacity – at best no more than 500,000 bbl/d – and non-OPEC producers have no spare capacity.

From a demand side, higher oil prices will have an impact on moderating oil demand – but oil demand is relatively inelastic unless the oil price exceeds $130. With higher oil prices, China will pull back from buying oil to fill its strategic reserves, which will reduce demand by around 750,000 bbl/d. China could also release volumes from its strategic reserves. Other countries could also release volumes from their strategic reserves, notably the U.S., the EU member states, Japan, South Korea and India. 

The U.S. has the capability to release 4.4 MMbbl/d for up to 90 days (until the volumes in caverns are depleted). The U.S., however, has stated that currently, there is no plan to release inventories from its strategic reserves. During 2022, with the beginning of the Russia-Ukraine conflict, International Energy Agency members collectively released between 1.0-2.0 MMbbl/d for more than one month, but could sustain 2.0-4.0 MMbbl/d for several weeks – and China could release around 1.0 MMbbl/d – for a total of 3.0-5.0 MMbbl/d. Nowhere near the total volumes associated with the Strait of Hormuz, but sufficient if only the Iranian supply is removed from the market.

Another factor that could result in the war lasting longer and devolving into a quagmire is that the U.S. appears to have no clear endgame, including no identified leader or entity to fill the power gap if the regime is removed from power. There have been some reports that the son of the former shah may return to Iran and take power, but that does not seem viable, considering how unpopular the shah was at the time of his overthrow, coupled with the son having no established support structure in Iran. The region could also fall into chaos with the war spreading, as illustrated by Israel widening its attacks to include Lebanon. Iran and its proxies could also attack or sabotage the export ports of other Gulf countries, which would extend how long volumes were off the market.

Outlook

Base case: Prices elevated for 1-2 weeks (around $80 and $100 possible) because of the halt in Hormuz transit and uncertainty. The worst case entails a prolonged conflict (a possibility with Israel’s incentive to extend strikes for military degradation and the possibility of Iranian proxies sabotaging Gulf ports or tankers), resulting in extended outages, pushing oil well above $100.

• Quick reopening unlikely—vast country size, hidden launchers/assets, and proxies make full resolution slow;
• No clear US/Israel endgame or successor identified (former Shah’s son unlikely to be viable); and
• Broader chaos, as illustrated by the Lebanon escalation, could widen disruptions.

What we are monitoring

• Any talks between the US, Iran, and Israel;
• Tanker movement through the Strait of Hormuz;
• US/IEA statements for SPR releases; and
• Involvement of additional entities and countries

For a complete forecast of crude oil and refined products and other energy-related fundamentals and prices, please refer to our Short-term Outlook.

About the Author: John E. Paisie, president of Stratas Advisors, is responsible for managing the research and consulting business worldwide. Prior to joining Stratas Advisors, Paisie was a partner with PFC Energy, a strategic consultancy based in Washington, D.C., where he led a global practice focused on helping clients (including IOCs, NOC, independent oil companies and governments) to understand the future market environment and competitive landscape, set an appropriate strategic direction and implement strategic initiatives. He worked more than eight years with IBM Consulting (formerly PriceWaterhouseCoopers, PwC Consulting) as an associate partner in the strategic change practice focused on the energy sector while residing in Houston, Singapore, Beijing and London.

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