Iran Conflict and Surging Oil Prices
Regime Change in Iran?
Changing an almost four-decade regime doesn’t happen every day. For Iran, that event took place over this past weekend when a joint United States and Israeli operation killed Iran’s Supreme Leader Ayatollah Ali Khamenei. The attack on Iran has generated counter attacks and as of Monday (March 2, 2026) there were no signs that the conflict was waning.
A weekend Reuters article quoted the Atlantic Council saying, “The Iranian system is bigger than one man – removing Khamenei could harden the regime rather than weaken it.” A clear regime change seems to be the goal of both the U.S. and Israel, and leads to the question, “how long will both sides be able to continue the existing conflict?”
What the conflict could mean for oil prices
Immediate Impact
Opening Sunday night trades in oil saw a strong spike, with Brent heading to $80/bbl and U.S. WTI front month contract gaining $5/bbl and crossing over $71/bbl. Pull up a monthly chart of WIT for the last four decades and we can see similar geopolitical spikes. One of the first major spikes came in the 1990-1991 first Gulf War era. Another notable spike, more recently, can be seen in the Arab Spring of 2011.
A Brief History
History buffs may recall that the first Gulf War price surge did not last long, while price increases from the Arab Spring held for a significantly longer period. In fact, the Arab Spring surge lasted, in some shape or fashion, until the latter half of 2014. At that point, Saudi Arabia made the infamous decision to flood the market with oil in order to stop the U.S. shale movement. As a result, for much of a four-year period, U.S. oil prices were above $80/bbl.
Current Prices
Which brings us full circle to the present day. Looking at 2022-2023, a period when oil markets were squarely under the influence of the Russia/Ukraine war, we see an extended period of time when oil prices were quite willing to trade between $55/bbl and $75/bbl. The recent invasion of Iran has taken oil prices to the upper end of that prior range. At first blush, the current rise in geopolitical events does not appear to be “too bad.”
Potential Impacts
However, Iran presents a unique twist to the global oil and energy markets. They control (or influence) the Strait of Hormuz through which 20% of the world’s oil flows. A possible closure of this avenue has released threats of oil prices surging to $100+ per barrel in the coming days and weeks. Oil prices first broke triple digits in 2008 and stayed there until the latter half of that year. In 2011, WTI values swelled above $100/bbl at the beginning of the Arab Spring and bounced near that mark – both above and below – many times until the last part of 2014.
Things to Consider
Will we see a repeat of the record-high prices of 2008 or 2011-2014? Time will tell.
However, we do have three clear issues to consider:
1. The U.S. has midterm elections in seven months.
Elevated oil prices will definitely put a crimp in the Republican party’s ability to hold power in Congress.
2. How much ammunition does each side have available?
Iran has responded with numerous missile attacks, many of which have been thwarted. Can each side keep up this pace?
3. Lastly, the impact of war on the Iranian citizens.
This nation has already been isolated with financial sanctions and now is at the beginning of a military conflict. How much longer will the population be able to cope with these impacts?
Conclusion
While there is no clear answer about how long this conflict will last, some of the factors listed above seem to point to a desire for a solution in the coming weeks and months rather than years. For that reason, we encourage everyone to watch the rise in oil prices with a bit of caution. Past experiences have shown a fast ascent when geopolitical tensions rise, but also an equally quick fall when tensions subside.
Current Events – March 2026
By JD Buss
