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WTI settled above $81 on Thursday after an 8.5% single-session surge. Brent hit $85.85 intraday Friday — a fresh 52-week high. Crude is headed for its largest weekly percentage gain since March 2022. And unlike 2022, the supply disruption this time is not one pipeline. It is an entire chokepoint.
Let’s get the levels straight. WTI closed Thursday at $81.01, up 8.5% on the session — the sharpest one-day move since the hours after Russia crossed into Ukraine. Brent settled at $81.40 and then ripped higher in Friday’s Asian session to touch $85.85, per Investing.com data, printing a new 52-week high before pulling back. The weekly gain on Brent stands at roughly 22% as of Friday morning. CNBC confirmed this is the biggest weekly percentage advance since March 2022.
The catalyst on Thursday was specific. Iran struck an oil tanker with a missile, per CNBC reporting, and the market responded by repricing the entire risk curve. This was not a warning shot or a near-miss. An actual cargo was hit. That changes the insurance calculus for every vessel operator still considering a Hormuz transit, and the insurance calculus is what matters here — not the military declarations.
Why Insurance Matters More Than Missiles
The Strait of Hormuz has not been closed by the Iranian navy. It has been closed by the P&I clubs. Protection and indemnity insurance was pulled for transits from March 5 onwards, per Wikipedia’s tracking of the crisis timeline. Without P&I coverage, a ship cannot legally sail. No flag state will authorise it. No port will receive it. No bank will finance the cargo.
This is the mechanism that makes the Hormuz disruption functionally different from every previous Middle Eastern oil shock. In 1990, Iraq invaded Kuwait and oil spiked because supply was physically removed. In 2019, drones hit Abqaiq and the market jumped because processing capacity was damaged. In 2022, Russia’s invasion triggered a repricing because traders feared secondary sanctions would strand Russian barrels. In each case, the oil existed. The question was whether it could move.
Today, the oil exists. The production facilities in Saudi Arabia, the UAE, Kuwait, and Iraq are largely intact. But the shipping corridor is uninsurable, which means it is unusable, which means roughly 20% of global seaborne crude and 20% of global LNG has no route to market through its primary export channel. Clarksons Research estimates approximately 3,200 ships — about 4% of global tonnage — are idle in the Gulf. Another 500 ships are waiting outside, per Al Jazeera citing Clarksons. That is not a disruption. That is a blockade achieved without a single naval vessel forming a picket line.
The Selective Closure Changes Everything
On Thursday, Iran formalised what the market had suspected since Tuesday. The IRGC announced via state broadcaster IRIB that the Strait is closed specifically to vessels from the United States, Israel, Europe, and their Western allies. Ships flagged to China and Russia may pass. “If vessels belonging to the United States, Israel, Europe and their supporters are observed, they will certainly be hit,” the IRGC stated, per CNN.
This creates a two-tier oil market that has no modern precedent. Chinese-flagged tankers were already transiting while Western shipping was frozen, per Kpler tracking data cited by Al Jazeera. That means Chinese refiners are accessing Gulf crude at prices that reflect a functioning supply chain. European and Asian allies of the US are accessing it at prices that reflect a war zone. Brent at $85 is not the price of oil. It is the price of oil for countries Iran considers hostile. For China, the effective price is materially lower because the logistical premium does not apply.
Think about what that means for your positioning. If you are running a European refinery, your feedstock cost just jumped 22% in a week and your forward supply is uncertain. If you are running a Chinese refinery, your feedstock cost rose modestly and your forward supply is being guaranteed by the country that controls the chokepoint. The competitive asymmetry is structural, not cyclical, for as long as this framework holds.
What the Analysts Are Saying
Barclays told clients in a note that Brent could hit $100 per barrel as the security situation spirals, per CNBC. UBS went further, warning that a “material disruption” scenario could send Brent spot above $120. These are not fringe forecasts. They are base-case-adjacent scenarios from desks that manage institutional commodity risk.
OilPrice.com reported that Iraq has already cut production by 1.5 million barrels per day, and analysts are warning that global shut-ins could reach nearly 5 million bpd if Hormuz remains disrupted for several weeks. For context, OPEC’s total spare capacity is roughly 5 to 6 million bpd — and approximately 70% of it sits behind the chokepoint, in Saudi Arabia, the UAE, and Kuwait. Spare capacity that cannot reach the market is not spare capacity. It is inventory trapped in place.
Edward Jones senior global investment strategist Angelo Kourkafas offered a more measured view, telling CNBC that “structural shifts have reduced US vulnerability to oil shocks” and that “oil would likely need to remain above $100 for an extended period to meaningfully slow economic growth.” He noted the US has been a net oil exporter since 2019. That is true. But the US economy does not operate in a pricing vacuum. If Brent stays above $85 and the Hormuz premium persists, inflation expectations will reprice globally, the Fed will have less room to cut, and the dollar will stay elevated — all of which feed back into commodity markets in ways that are not friendly to risk assets.
The 2022 Parallel and Where It Breaks
The comparison to March 2022 is instructive but imperfect. When Russia invaded Ukraine, Brent spiked from $97 to $128 within two weeks before settling in a $100-120 range for months. The driver was a combination of genuine supply fear and speculative positioning. The resolution came when it became clear that Russian barrels were still reaching the market through shadow fleets and third-country intermediaries. The supply was never physically lost. It was rerouted.
This time, the supply is physically inaccessible for the majority of the global fleet. You cannot reroute through a closed strait. Saudi Arabia has started redirecting some cargoes to its Red Sea port of Yanbu — Pakistan formally requested this on Wednesday, per Al Jazeera — but Yanbu’s pipeline capacity is a fraction of what moves through Ras Tanura and the Gulf terminals. The East-West pipeline (Petroline) can carry roughly 5 million bpd, but actual throughput has historically been well below that, and ramping it up takes time the market does not have.
There is one development that could cap the upside near-term. The Trump administration signalled on Thursday evening that it is “considering several options” to address the oil price spike, per CNBC. Crude pulled back modestly in Friday pre-market on the headline. The options likely include a Strategic Petroleum Reserve release, accelerated permitting for US producers, and the naval escort programme Trump proposed earlier in the week. Each of these has limits. The SPR is already at historically low levels following the 2022 drawdown. US producers cannot ramp meaningfully in weeks. And naval escorts do not solve the insurance problem — a tanker with a US Navy destroyer alongside it is still uninsurable if the P&I clubs say so.
What to Watch
Three things matter now. First, the February US jobs report, due this morning. A strong number pushes the Fed further from any near-term cut and strengthens the dollar, which historically caps crude rallies. A weak number gives the Fed more room but raises recession fears that also weigh on oil demand. The market is in a box.
Second, whether Iran maintains the selective closure framework or escalates to a universal blockade. The current posture — open for China and Russia, closed for everyone else — is economically devastating for the West but strategically manageable for Iran because it avoids antagonising Beijing. If that discipline breaks, expect another leg higher.
Third, OPEC’s response. The cartel has been sitting on significant spare capacity with a plan to gradually increase output. That plan assumed a functioning Strait. If Hormuz stays closed for weeks, OPEC’s ability to moderate prices evaporates because the barrels cannot reach the customers who need them most. The producers with Red Sea export options — primarily Saudi Arabia — gain disproportionate pricing power. Everyone else waits.
Brent at $85 with 70% of OPEC spare capacity trapped behind a closed strait is not the ceiling. It is the floor. The ceiling depends on duration, and duration depends on a war that shows no sign of ending. Size your exposure accordingly.
