Morning Highlights: Oil and Gas Surge as Israel and U.S. Strikes on Iran Trigger Middle East Supply Shutdowns, Hormuz Disruption

Monday, March 2, 2026

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MARKET SNAPSHOT

Oil prices surged on the reopen after Israeli and U.S. strikes on Iran and Iranian retaliation forced shutdowns of oil and gas facilities across the Middle East and severely disrupted shipping through the Strait of Hormuz. Brent crude spiked as much as 13% overnight to $82.37/bbl, the highest since January 2025, before pulling back to trade up $5.29 (7.2%) at $78.16/bbl by 6:30 AM EST. WTI hit an intraday high of $75.33, up more than 12%, before easing to $71.75, still up $4.73 (7.2%).

The initial gap higher was violent but fell short of the $90 to $100 per barrel open some analysts had warned about over the weekend. This suggests a meaningful risk premium was already embedded into prices ahead of the strikes. As Shore Capital’s James Hosie put it, the move reflects uncertainty around both the scale and duration of the conflict and the possibility that Iran’s political future now has direct implications for regional stability.

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TOP DEVELOPMENTS

Middle East Energy Infrastructure Hit as Conflict Escalates

The conflict entered a more dangerous phase as Israeli and U.S. strikes, followed by Iranian retaliation, forced precautionary shutdowns of oil and gas facilities across multiple countries. Saudi Arabia shut its largest domestic refinery, Ras Tanura (550 kbpd), after a drone attack, while oil and gas output was suspended across Iraqi Kurdistan and several major Israeli gas fields.

In Iraqi Kurdistan, producers including DNO, Gulf Keystone, Dana Gas, and HKN Energy halted production at fields that had been exporting roughly 200 kbpd via the Ceyhan pipeline. Offshore Israel, Chevron was instructed to temporarily shut the Leviathan gas field, which is in the process of expanding capacity to 21 bcm per year under a $35 billion export deal with Egypt. Energean also shut its production vessel serving smaller gas fields.

In Iran, explosions were reported on Kharg Island, which handles roughly 90% of Iranian crude exports, though the extent of any damage remains unclear. Iran produces roughly 3.3 million bpd of crude plus another 1.3 million bpd of condensate and liquids, about 4.5% of global supply.

This is no longer a hypothetical supply risk scenario. Real assets are being shut, even if largely precautionary so far.

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Strait of Hormuz Near Halt Raises Systemic Risk

At least three tankers were damaged, one seafarer was killed, and roughly 150 ships were reported stranded around the Strait of Hormuz after attacks over the weekend. Shipping through the chokepoint has slowed to a near halt, significantly raising escalation risk.

On a normal day, tankers carrying roughly 20% of global oil demand transit the Strait, along with about 20% of global LNG flows. Any prolonged disruption here would rapidly overwhelm spare capacity elsewhere and force coordinated emergency responses.

This is why the market reacted so violently. Hormuz is not just another geopolitical headline. It is the fulcrum of global energy flows.

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Saudi Arabia: Ras Tanura Attack Marks Major Escalation

Saudi officials said the situation at Ras Tanura was under control after two drones were intercepted, with debris causing a limited fire. Some refinery units were shut as a precaution, though domestic fuel supply was not affected. Still, the symbolism matters.

The attack on Saudi Arabia’s Ras Tanura refinery marks a significant escalation, with Gulf energy infrastructure now squarely in Iran’s sights, said Torbjorn Soltvedt of Verisk Maplecroft. He added the strike could push Saudi Arabia and other Gulf states closer to directly joining U.S. and Israeli military operations.

Markets remember September 2019. Ras Tanura may be heavily fortified, but it is also a critical export terminal and now a demonstrated target.

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Natural Gas Joins the Party

European gas markets reacted even more aggressively. The Dutch TTF front month contract jumped more than 25% early Monday before easing to 38.80 euros per MWh, or $13.30 per mmBtu, still up 21% from Friday.

Israeli gas shutdowns throttled exports to Egypt, tightening regional LNG balances at a time when Middle East escalation raises broader concerns about LNG shipping security.

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OPEC+, SPRs, and the Policy Backstop

OPEC+ agreed Sunday to boost output by 206,000 bpd for April, but RBC’s Helima Croft noted that every producer is effectively pumping at capacity except Saudi Arabia, whose facilities are now under attack.

The International Energy Agency said it is in contact with major Middle East producers and stands ready to coordinate strategic petroleum reserve releases if needed. Goldman Sachs noted visible global inventories sit near historical medians at roughly 74 days of demand, offering some buffer, but only if flows resume quickly.

Citi expects Brent to trade in an $80 to $90 range this week, assuming the conflict remains intense but short lived. Their base case still assumes either a rapid regime change in Iran or U.S. de escalation within one to two weeks.

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Downstream Fallout: Gasoline Prices Flash Warning

U.S. gasoline futures surged as much as 9.1% to $2.496 per gallon, the highest since July 2024, and were last up 4.6%. Analysts warned retail gasoline prices could break above $3 per gallon if the conflict drags on, a politically sensitive outcome ahead of November’s midterm elections.

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BOTTOM LINE

Oil and gas markets have entered a fundamentally different regime. This is no longer about abstract geopolitical risk premiums. Real barrels and molecules are being shut in across Saudi Arabia, Iraqi Kurdistan, Israel, and potentially Iran, while shipping through the Strait of Hormuz has slowed to a near standstill. Brent’s spike above $82 and sustained trade near $78 reflects markets pricing genuine disruption, not just fear.

That said, the pullback from overnight highs matters. Some of this risk was already priced in, inventories are near historical norms, and emergency policy tools remain available. Citi’s $80 to $90 range assumes the conflict burns hot but short. If Hormuz remains partially closed, or if Kharg Island or Ras Tanura suffer confirmed damage, that range breaks quickly to the upside.

Gas markets may be the canary here. Israeli shutdowns, LNG exposure through Hormuz, and Europe’s sharp TTF reaction highlight how quickly this can become systemic.

For now, markets are treating this as a severe geopolitical shock, not yet a full blown energy crisis. The line between the two runs straight through Hormuz. Watch shipping flows, Saudi export operations, and whether precautionary shutdowns turn into confirmed outages. If they do, $90 Brent will not be a theoretical level anymore.