Oil Volatility, Iran and Strait of Hormuz

By: Tom Pawlicki, Senior Specialist, Market Intelligence

Mon, 09 Mar 2026, 19:42

The oil market surged as much as $28.58/bbl to $119.48/bbl at the overnight high last night and reached the highest price since mid-2022. Prior to the overnight rally, prices had advanced $23.88/bbl last week, or 35.6%.

A significant amount of negative news regarding the war with Iran had already been priced through last week. However, the naming of Mojtaba Khamenei to succeed his father, the Ayatollah Ali Khamenei, showed that Iranian hardliners remain in control and that the relatively “easy” path of regime change may no longer be on the table. With the announcement, the potential length of the war seemed to have extended, and the likelihood of ground forces increased from what was expected at the beginning of the conflict. The hold on power by the hardline clerics implies that the country will continue to fight back and potentially maintain strikes on neighboring Arab countries and thus keep oil prices higher for longer.

However, oil prices were unable to maintain that bullish sentiment and reversed lower throughout the overnight and morning hours. They were up less than $4.00/bbl just before noon today – much less than the $28.58 gain seen overnight. CNBC reported that there may have been a large options trade that unwound overnight, and there may have been other large positions that were short-covering. The covering of those trades along with the potential that the IEA/G7 announces emergency oil reserve sales tomorrow may also have pressured the market. Other negatives such as escorting tankers through the Strait of Hormuz or Saudia Arabia’s shipping of oil from Red Sea ports may also add pressure once they begin.

The evaluation of the war’s progress remains the biggest driver of prices and is where the energy markets become extremely muddy. There have been several calls for $150-$200/bbl oil made in the past 24 hours, however, comments from Energy Secretary Wright and Treasury Secretary Bessent imply very little likelihood of such moves. Wright said that energy will begin to flow through the Strait “soon” and that the only oil supply disruptions being seen are in Asia. For that reason, he said that some Russian oil that is flowing near Asia will be allowed to discharge there. Secretary Bessent’s comments were similar and he said that even more Russian oil could be unsanctioned via a 30-day waiver. It may be considered “happy talk” from the administration, but they do control the pace of the war and only they know for sure what is coming next.

For the Strait of Hormuz, it was reported today that a Greek-operated oil tanker sailed through the Strait with a cargo of Saudi crude and had a destination of India. It is likely that more ships will begin transiting the Strait once the number of missile launches dwindles and US Navy vessels begin escorts.

There have been numerous reports that Iran’s ability to launch missiles and drones has been severely curtailed. Reports suggest that as many as 64 waves of Iranian attacks were launched on March 1 at various Gulf area targets including Israel, but those waves have fallen to just 6-10 each day in the last three days. Numbers on actual missiles & drones that were fired and remaining missile counts vary widely, but their numbers are estimated to be down 70-90%. Their suppression is likely a requirement for any resumption of transits of the Strait of Hormuz before the US Navy begins escorts. President Trump on March 3 ordered the U.S. International Development Finance Corporation to provide political risk insurance and financial guarantees for maritime trade travelling the Gulf.

The impact on transits through the Strait of Hormuz was immediate, as the number of transits on the day before the war on February 27 was 34 vessels in both directions. On February 28, that number fell to 28 transits, but only three vessels moved through the area on March 1. There were zero transits in the five days from March 2-6, but there were two on Saturday and one on Sunday.

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The difficulty in forecasting price direction in energies is knowing who or what to believe. President Trump is scheduled to have a news conference this afternoon. He said on Friday that he would not settle for anything less than unconditional surrender and that troops on the ground are a possibility. But he would have to secure the Iranian government with those troops along with the country’s uranium stockpiles. Both are daunting and risky tasks. However, knowing that the Ayatollah Khamenei has been killed and the country’s military severely degraded, he could also choose to take an off-ramp and declare victory. He has pulled back from other issues such as tariffs last April and invading Greenland in January. It is an election year and affordability has been a political buzzword this year.

A third option may be to begin escorting tankers and other vessels through the Strait and offer US-backed insurance to shippers. That could allow President Trump more time to accomplish the initial goals in Iran while bringing normalcy to energy markets. What the president ends up choosing is anyone’s guess.

Energy

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