Oil Prices, Economic Cascades, and the Cost of Energy Vulnerability
On February 28, 2026, the United States and Israel launched coordinated military strikes against Iran, triggering the most significant energy supply disruption since the 1973 Arab oil embargo. Within days, Iran retaliated with missile and drone attacks, and the Islamic Revolutionary Guard Corps declared the Strait of Hormuz closed.
Roughly 20 percent of the world’s daily oil supply passes through the Strait of Hormuz. The consequences are immediate and severe.
The Strategic Picture
The Strait of Hormuz is the single most critical energy chokepoint on earth. Approximately 13 million barrels per day of crude oil transited the waterway in 2025, representing 31 percent of all seaborne crude flows.
The disruption is historically unprecedented. Production cuts could exceed 4 million barrels per day if the closure persists. Brent crude trades above $90 per barrel, WTI above $106, and U.S. gasoline prices have surged in just over a week.
Policy Implications
The current crisis exposes three structural vulnerabilities: energy infrastructure diversification is not optional, domestic refining capacity must match domestic production, and price exposure cannot be hedged by volume alone.
The United States produces more crude oil than any nation in history. It simultaneously imports refined products because its refining infrastructure is not configured to process the light sweet crude it produces into the full range of fuels the economy requires.
For the full analysis with data tables and source citations, see the complete report at IAMT.
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