The Strait of Hormuz has been effectively closed since March 2, cutting off roughly 20% of global oil supply and pushing Brent crude to $85.12 a barrel, its highest level since July 2024.
U.S. and Israeli forces launched coordinated strikes on Iran beginning February 28 under Operation Epic Fury, killing Supreme Leader Khamenei and targeting military installations and nuclear sites. Iran retaliated immediately, striking Israeli territory, U.S. military bases across Gulf states, Saudi Arabia, and the UAE. The Islamic Revolutionary Guard Corps confirmed the Hormuz closure on March 2 and struck a container ship attempting transit.
Tanker traffic collapsed from roughly 70% of normal volume to effectively zero within days. More than 3,200 vessels representing 4% of global tonnage are now idle in the Gulf. Approximately 150 container ships remain trapped west of the strait. President Trump announced the U.S. Navy will escort tankers through the strait "as soon as possible." No escort operations have begun.
The Numbers
Brent settled at $83.44 on March 4 after touching $85.12 intraday, up more than 13% since the conflict began. WTI rose to $76.26, a 7% single-session gain, marking three consecutive days of advances. The national average retail gasoline price hit $3.11 per gallon on March 3 after an 11-cent overnight spike, the largest single-day jump since 2022.
The strait normally carries 13 to 15 million barrels per day, approximately 31% of all seaborne crude. Iran was exporting 1.3 to 1.6 million barrels per day at the time of the strikes, with China absorbing 800,000 to 1.2 million barrels per day via shadow fleet operations. Those barrels are now offline.
OPEC+ spare capacity sits at 5.0 to 5.5 million barrels per day, most of it held by Saudi Arabia and the UAE, both of which absorbed Iranian strikes and face their own export disruption risk. The 206,000 barrel per day output increase OPEC+ announced for April is operationally irrelevant if Hormuz transit remains blocked. Goldman Sachs raised its Q2 Brent forecast by $10 to $76 before the latest escalation. Analysts now warn five weeks of disruption could push crude above $100. Live crude prices, crack spreads, and real-time market indicators are tracked at FuelSignal Market.
Refining Margins and the Scenario Range
The 3-2-1 crack spread has expanded $3 to $5 per barrel since the conflict began. Product prices are repricing faster than crude input costs, as they consistently do during supply shocks. Refinery utilization stood at 88.6% as of the last EIA report on February 20. RBOB gasoline is at $2.49 per gallon. Heating oil is at $3.17. Both move higher if crude holds its trajectory.
U.S. refiners running domestic WTI are structurally advantaged. When Middle East risk spikes, the WTI-Brent spread widens, cutting feedstock costs relative to European and Asian competitors now scrambling for alternative grades. Iranian medium sour crude, roughly 30 to 34 API gravity at 1.5 to 2.5% sulfur, was discounted feedstock for complex Asian refineries. Replacing it costs a premium. A crack spread move above $8 to $10 per barrel signals the market is pricing in an extended disruption.
Three scenarios frame the range of outcomes, and the situation as of March 4 is tracking between the middle and worst case. In the contained scenario, WTI settles in the $70 to $80 range, crack spreads normalize within two to three weeks, and pump prices rise 15 to 25 cents before fading. This requires rapid diplomatic resolution or Navy escort operations that effectively reopen the strait. Current signals do not support it.
The extended conflict scenario, consistent with the current trajectory if escorts begin but face ongoing IRGC harassment, puts crude near $90. Pump prices rise $0.40 to $0.60 per gallon from current levels. War risk insurance premiums for Gulf transit add a cost layer even for ships that successfully pass under escort.
A full prolonged closure is no longer a tail risk. The IRGC claimed complete control of the strait on March 4. Analysts warn crude could exceed $100 per barrel, with some characterizing the potential impact as three times the severity of the 1970s Arab oil embargo. With 20% of global oil supply physically blocked, the economic trajectory enters recession territory.
The historical parallels are instructive but incomplete. The 1990 Gulf War triggered a sharp, short-lived crude spike. The 2019 Abqaiq drone attack moved crude $10 overnight before recovering. The 2022 Russia sanctions created a sustained supply shift that took months to fully reprice. The Hormuz closure is structurally different from all three. It is a physical chokepoint, not a supply source disruption. There is no rerouting option that replaces 13 to 15 million barrels per day on a short timeline.
Crude stocks stood at 415.4 million barrels as of February 20. That buffer erodes quickly at scale. The conflict is now past the one-week mark with no resolution in sight and no Navy escorts operational. A week of disruption is a blip in annual supply balances. A month rewrites the playbook for refinery planning, inventory strategy, and product pricing.
For refiners, wider crack spreads are a margin tailwind, but input cost volatility compresses planning windows. For fuel retailers, wholesale price spikes are already outpacing pump price adjustments. The 11-cent overnight jump in the national average is the leading edge, not the peak. For refining equities, PSX, VLO, and MPC have historically outperformed during supply shocks when crack spreads widen, a pattern consistent across 1990, 2005, and 2022. If crude approaches $100, demand destruction becomes a countervailing force.
This is not 2022. Iran is a smaller exporter than Russia. The direct volume impact of losing Iranian barrels is manageable. The Hormuz chokepoint is not. Duration is the variable that separates a spike from a crisis, and the IRGC is claiming complete control of the channel that carries a fifth of the world's oil supply. Geopolitical signals are scored and updated in real time at FuelSignal Signals. Crude prices and crack spreads are live at FuelSignal Market.