The current escalation of events between Israel and Iran has sparked global concern on its possible impact on oil prices. 

Iran holds about 12% of the world’s oil reserves. Additionally, it currently exports between 1.5 million and 2 million barrels per day, primarily to China. Iran is the third-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC). It extracts about 3.3 million barrels per day (bpd) of crude oil and another 1.3 million bpd of condensate and other liquids.

As of the 18th of June 2025, according to Reuters, oil prices climbed over 4% on Tuesday as the conflict continues. If the strikes continue, the risk will return to oil markets as energy production and exports continue to be impacted. 

Rise in Oil Prices

These conflicts continue to threaten the region that pumps a third of the world’s oil and thus continue to risk an increase in oil prices.

On the 13th of June 2024, Brent crude, the main global benchmark for pricing oil, rose to around USD 78 per barrel. It has since fallen back to USD 76.71 per barrel, as of the 18th of June 2025. However, it is still higher than it was this time last month.

South Pars Field

Some of Iran’s most vital oil and gas facilities have been struck, raising fears of regional escalation and threatening turmoil for markets. Among the locations targeted was the massive South Pars gas field, which Iran shares control of with Qatar. It is also 

part of the world’s largest reservoir of natural gas and the source of two-thirds of Iran’s gas production.  Not only that, it also accounts for nearly 20 percent of the known global reserves.

This attack forced Iran to partially suspend production at the field, which raises concerns that the conflict could impact Iran’s energy production and supply. Qatar has stated that its gas production on the field is currently steady and proceeding normally. However, it did disclose that the targeting raises concerns regarding global gas supplies.

The Fajr jam gas plant, one of Iran’s largest processing facilities, was also attacked. This is significant as it processes fuel from South Pars as well as other fields.

Additionally, the Shahran fuel and gas depot, one of Iran’s biggest oil refineries, was also struck. However, officials stressed that no significant fuel shortages are being anticipated because of the low volumes stores at the time of impact.

This continued focus and attacks on Iran’s energy facilities threatens a continued disruption of oil supplies that could undoubtedly impact global oil prices.

Strait of Hormuz

Iran has noted that it is considering closing the Strait of Hormuz amid the intensifying conflict. The strait is critical to global energy shipments as 20% of global oil and 20% of liquefied natural gas (LNG) flow through it. On a daily basis, 20 million barrels of crude, condensate, and fuels flow via the waterway.

If the conflict leads to a complete disruption of Iranian oil supply and the closure of the Strait of Hormuz, it could push oil prices up to USD 120 per barrel.

The significance of the strait is vast, given that it is one of the world’s most important gateways for oil transport. The Strait of Hormuz is a channel linking the Persian Gulf with the Gulf of Oman and the Arabian Sea. The Strait separates Iran from the Arabian Peninsula and comes with great strategic and economic importance.

So far, the volume of transportation has not been affected. However, 

The Joint Maritime Information Centre (JMIC) reported that while the strait remains open, the threat to traffic is still significant. It also reported an ongoing jamming of communications signals in the broader Arabian Gulf and the Strait.  The United Kingdom Maritime Trade Operations (UKMTO) also reported that it received multiple reports of increasing electronic interference. 

Any disruption to the Strait could increase shipping insurance, delay delivery times, and increase global supply chain challenges.

Wider Impact 

The most direct impact of higher oil prices on daily lives is higher petrol prices. However, when energy prices increase it means the price of goods also rises. This is because it becomes more expensive to run machinery and transport products.

The U.S. Energy Information Administration (EIA) estimates that 82% of crude oil and condensate that moves  through the strait arrives in Asia. Thus, those most impacted by a supply disruption are China, India, Japan, and South Korea. Together they account for nearly 70% of crude oil transported through the strait.

As tensions escalate, the threat to one of the world’s most critical energy corridors grows more real. While oil and gas flows have yet to be seriously disrupted, the mere possibility of a shutdown in the Strait of Hormuz or sustained damage to Iran’s key energy infrastructure has already rattled the energy market. 

For now, the world is monitoring any further escalation that could impact everything from fuel prices to global supply chains and everyday consumer costs. 

Whether or not the regional escalations turn into a full-blown energy crisis depends on what happens next.