Oil prices surged on Friday after Israel launched a pre-dawn airstrike on key Iranian nuclear and missile infrastructure, in what many analysts are calling the most significant geopolitical escalation since Russia’s invasion of Ukraine.

U.S. benchmark crude futures jumped more than 7%, closing at $72.98 a barrel, after briefly topping $77 in early trading. Brent crude also surged, ending the session at $74.23 per barrel. The initial spike came after Israel’s “targeted military operation” struck Iran’s nuclear enrichment facility at Natanz and reportedly killed senior members of the Iranian military.

By Friday evening local time, Iran had responded with a barrage of missiles aimed at Israeli targets, escalating investor fears that a broader regional conflict could be in play one that threatens critical oil flows from the Middle East.

So far, there have been no confirmed disruptions to oil infrastructure. But markets remain on edge. Iran produces over 3.3 million barrels of oil per day, and any retaliatory strike that jeopardizes oil exports from Iran or neighboring countries could send prices sharply higher.

U.S. Secretary of State Marco Rubio clarified that the United States had no role in the Israeli strikes, calling it a “unilateral action,” while emphasizing that Washington’s priority remains the protection of American forces in the region. President Donald Trump, meanwhile, doubled down on his earlier nuclear ultimatum to Iran, stating: “They should have done it… Today is day 61.”

Energy experts are now watching closely for signs of Iranian retaliation that could disrupt shipping lanes particularly through the Strait of Hormuz, a chokepoint for nearly a fifth of global oil traffic.

“The concern is that if Iran retaliates further — especially against oil infrastructure or transit routes — we could see oil spike well above $90,” said Andy Lipow, president of Lipow Oil Associates. “And that’s not good news for a U.S. administration that is banking on lower gasoline prices heading into the election.”

The International Energy Agency (IEA), which oversees strategic reserves among member countries, said it is monitoring the situation and stands ready to act. “Markets are well supplied today, but we’re ready to respond if needed,” said IEA Executive Director Fatih Birol, noting that the agency holds 1.2 billion barrels in emergency reserves.

No Oil Facilities Hit But Risks to Supply Still Loom

While Friday’s Israeli strike on Iran was seen as a significant escalation, one major source of relief, at least for now, is that Iran’s oil production infrastructure remains untouched. That has helped calm fears of an immediate supply shock in global markets.

Ellen Wald, co-founder of Washington Ivy Advisors, noted that Iran hasn’t suffered any direct hits to its oil fields or export terminals, meaning Tehran can continue pumping and shipping oil. “For Iran, there’s little strategic benefit in trying to choke off oil through the Strait of Hormuz,” she said, referring to the narrow waterway through which roughly 20% of the world’s oil moves daily.

Still, the possibility of disruption can’t be ruled out entirely. While Iran may not have a long-term ability to fully block the Strait, even a short-term disruption through naval threats, tanker seizures, or GPS interference could rattle supply chains and push prices higher. Similar tactics were observed during earlier periods of heightened tensions.

What makes this calculus more complicated for Iran is its largest buyer: China. Any interference with the Strait risks angering Beijing, which depends heavily on stable, affordable energy supplies from the Persian Gulf. “China doesn’t want prices to rise or oil flows to be blocked, and it will apply pressure on Tehran accordingly,” Wald added.

That geopolitical nuance may explain why oil prices haven’t skyrocketed despite the headlines. Much of the future direction depends on how Tehran responds. A symbolic or limited military reaction might allow markets to cool. But a direct attack on energy infrastructure or U.S. bases in the region would almost certainly send prices spiking again.

Meanwhile, producers like Saudi Arabia and the broader OPEC+ alliance are likely to remain on the sidelines. “They’re not going to jump in to increase output just yet,” said Robert McNally, a former White House energy adviser. “It’s in their interest to avoid looking like they’re profiting from the fallout.”

Even U.S. shale producers are holding back. With prices only recently stabilizing above $70 a barrel, companies are wary of investing heavily in new drilling projects. Many remember the recent downturns all too well and know geopolitical price spikes can vanish just as quickly as they appear.

Gasoline prices in the U.S. remain relatively tame, about 9% cheaper than this time last year. But electricity and heating costs are climbing, and any sustained rise in oil could filter through the broader economy.

President Trump is keenly aware of the political stakes. On Thursday, just before the Israeli strikes, he openly fretted about oil prices creeping up. “I don’t like that the oil prices have gone up just a little bit over the last few days,” he said, jokingly scolding Energy Secretary Chris Wright at a White House event.

Should prices rise further, Trump could lean on traditional allies like Saudi Arabia to ramp up production, or release strategic reserves in a bid to shield American consumers. But even these levers may prove limited if the region spirals into prolonged conflict.

So Why Iran Is Unlikely to Shut the Strait of Hormuz Even in Wartime

As Israel’s targeted airstrikes on Iranian military and nuclear-linked sites has shaken up the world, one question continues to linger over global energy markets: Will Iran retaliate by attempting to choke off the Strait of Hormuz?

It’s a natural fear, after all, nearly 20% of the world’s oil supply flows through this narrow waterway, which connects the Persian Gulf to the Arabian Sea. Any disruption could jolt energy markets, sending prices soaring and sparking fresh concerns over global inflation.

But according to energy experts and geopolitical analysts, a full-scale shutdown of the Strait is more of a threat on paper than a real strategic option, all thanks to China (As already mentioned above).

“There’s simply no upside for Iran in trying to block Hormuz,” said Anas Alhajji, managing partner at Energy Outlook Advisors. “They’d hurt their friends—like China—far more than their foes.” China, the top buyer of Iranian crude and the country’s biggest trading partner, would have a lot to lose if oil flows from the Gulf were disrupted. Beijing is unlikely to sit back quietly if its energy security is threatened.

In addition, most of Iran’s own daily necessities, everything from food to consumer goods, pass through the Strait. Therefore, any attempt to block it would end up strangling its own economy first.

From a logistical perspective, shutting the Strait is also no easy feat. “Let’s be real—most of the waterway isn’t even under Iranian control,” Alhajji added. The narrowest part of the Strait spans roughly 35 miles, and much of the navigable path lies within Omani and Emirati waters. Tankers can be rerouted if necessary.

Ellen Wald of Transversal Consulting echoes that sentiment. “A blockade would be a ‘last resort’—something we’d only see if there was direct military confrontation between Iran and the U.S.,” she said. So far, despite fiery rhetoric, that threshold hasn’t been crossed.

Still, Iran has shown in the past that it’s capable of creating instability without launching a full blockade. In previous high-tension episodes, the country has seized oil tankers, interfered with GPS signals, or used small-scale naval provocations to send a message. These sorts of disruptions may be more likely if tensions continue to escalate.

Additionally, the U.S. Fifth Fleet, stationed in Bahrain, serves as a strong deterrent to any long-term blockage. Any aggressive move in the Strait would likely trigger swift retaliation and international backlash. That, in turn, could derail whatever leverage Iran hopes to preserve as diplomatic talks over its nuclear program hang in the balance.

Even President Trump, never shy of issuing strong warnings, seems aware of the tightrope Iran is walking. Military options remain on the table, but analysts believe the bigger game may still be negotiations – not war.

For now, the Strait remains open. But as the region braces for potential aftershocks from Israel’s strike, traders and governments alike are keeping one wary eye on the waterway and the other on Tehran’s next move.

The Last Bit, The Real Cost of Escalation May Be Political, Not Just Economic

For now, the oil is still flowing, tankers are still moving, and the Strait of Hormuz remains open, more out of economic necessity than diplomatic calm. What’s increasingly clear is that while the risk of physical disruption looms, the larger volatility lies in perception and policy.

Oil prices may swing in the near term, but the real challenge is strategic: how nations handle the fine line between deterrence and escalation and with the U.S. cautious not to be drawn into a broader conflict, China quietly exerting pressure behind the scenes, and regional players treading carefully, energy markets are entering a new phase – one where geopolitics, not supply and demand, calls the shots.

President Trump may demand lower fuel prices and Saudi cooperation, but the uncomfortable truth is that neither he nor the markets can fully predict how long this geopolitical tremor will last – or how deep it may go.

Therefore, what’s certain is this –  in a world where a drone strike or missile launch can add dollars to a barrel in seconds, stability is the most valuable commodity of all – and right now, it’s in short supply.