2026 Iran Conflict: Global Oil Crisis, Hormuz Disruption & Impact on India

Nobody who watched oil prices open on February 28, 2026, expected the year to end up looking like this. Brent crude was sitting at a fairly ordinary $71 a barrel that morning. Within 48 hours it had jumped 8 percent, and within three weeks it was flirting with $120. By the time the dust settled months later, the episode had become one of the sharpest energy shocks in modern history, and honestly, one that caught a lot of very experienced analysts flat-footed.

Here's what happened, why it mattered so much more than the usual Middle East flare-up, and what it left behind.

How It Started

On February 28, the United States and Israel launched a joint military campaign against Iran, codenamed Operation Epic Fury. It wasn't a limited strike. Within the first day, Iran's Supreme Leader Ali Khamenei had been killed along with a number of senior officials, and more than a thousand sites across the country had been hit. Iran responded almost immediately, firing missiles and drones at targets across nine countries in the Gulf and, critically, moving to shut the Strait of Hormuz.

That last part is what turned a regional war into a global economic event.

Within 48 hours of the opening strikes, tanker traffic through the strait had collapsed to almost nothing. On March 6, the US Treasury had to grant India an emergency 30-day waiver just so it could buy stranded Russian crude sitting at sea, because the normal supply chain had effectively stopped functioning. By March 18, after Israel struck Iran's South Pars gas field (the largest gas field on earth), Brent was over $108 and climbing toward $120. India, meanwhile, cut fuel excise duties to cushion consumers as the rupee slid to an all-time low near 95 to the dollar.

Why the Strait of Hormuz Actually Matters

It's easy to read "chokepoint" in a headline and move on, so it's worth pausing on why this one specific 33-kilometer stretch of water between Iran and Oman carries so much weight.

Something like 20 million barrels of oil pass through the strait every day, close to a fifth of everything the world consumes. On top of that, roughly 110 billion cubic meters of LNG move through it annually, most of it out of Qatar's Ras Laffan terminal, which happens to be the largest LNG export facility on the planet.

For decades, traders more or less priced in an assumption that no matter how tense things got politically, the oil would keep flowing because everyone, including Iran, needed the revenue. That assumption held through wars, sanctions, and plenty of saber-rattling. It did not hold in 2026.

The alternative routes just aren't built for this. Saudi Arabia and the UAE have pipelines that can move about 2.6 million barrels a day around the strait, which sounds like a lot until you remember that leaves roughly 18 million barrels a day with nowhere else to go. The US doesn't have anywhere near enough spare production capacity to fill that hole either. When people compared this to the 2022 disruption from Russia's invasion of Ukraine, the comparison mostly fell apart on this point. In 2022, buyers could reroute, tap strategic reserves, and find new suppliers. A physical blockade of Hormuz doesn't leave much room for any of that.

The Price Spike and Why It Kept Going

Oil went from $71 to nearly $120 in under three weeks. That's a genuinely rare move. For context, the all-time high for Brent was around $147, set back in 2008, and for a while in March some traders were openly talking about $150 becoming realistic again.

The mechanics behind it were straightforward but brutal. Gulf producers were losing somewhere between 7 and 10 million barrels a day of output, not always because fields were being bombed, but because storage tanks were full and there were no tankers moving to take the oil away. Iraq, Kuwait, and the UAE all ended up throttling production for exactly this reason. Analysts at Rystad Energy warned at the time that even a sudden ceasefire wouldn't fix this quickly, since fields that get shut down for weeks or months don't just switch back on. Restarting takes real time.

Insurers made things worse. On March 5, war-risk coverage for the region got pulled by most major underwriters. Without insurance, a $200 million tanker simply isn't going anywhere, no matter what the spot price says. So shipping lanes emptied out on top of the physical blockade, and the whole system seized up in a way that a normal price shock doesn't usually produce.

The Damage Went Well Beyond the Pump

The Gulf isn't just an oil tap. It supplies about half the world's urea and sulfur exports and a fifth of the LNG that feeds nitrogen fertilizer production, so fertilizer prices jumped hard, with some forecasts pointing at nitrogen prices roughly doubling from 2024 levels. Helium supply, which matters a lot to chipmakers, took a hit too, since the Gulf is one of the few major sources of it. Airlines rerouted around closed Middle East airspace and ate the extra fuel costs. None of this shows up if you're only watching the price of a barrel of crude, but it all traces back to the same chokepoint.

India Felt It the Hardest

India imports more than 85 percent of its crude, and about half of that historically moved through Hormuz. It also relies on the Gulf for roughly 80 percent of its natural gas and over 90 percent of its LPG. So when the strait closed, India wasn't a participant in the war, but it absorbed a huge share of the economic cost.

LPG prices at home rose by around 60 rupees a cylinder. The government told refiners to redirect propane and butane toward household cooking gas instead of petrochemical feedstock. Fertilizer plants and power grids got knocked down to reduced gas allocations. India's crude basket price roughly doubled from under $80 to around $140 a barrel at the peak, and the country burned through its strategic reserves faster than planned while it waited on that Russian oil waiver to bridge the gap.

Moody's flagged India as the most exposed major economy in the whole episode, with growth potentially running as much as 4 percent below baseline if the conflict dragged on. The math on inflation was ugly too: every 10 percent rise in oil prices tends to add somewhere around 40 to 60 basis points to Indian CPI, and every $10 increase in the price of a barrel widens the current account deficit by roughly half a percentage point of GDP. At $140 oil, that worked out to tens of billions of dollars a year in extra outflows. And with around 10 million Indians working in the Gulf sending home more than $40 billion annually, any slowdown there was always going to ripple straight back into household budgets across several Indian states.

What Happened Next

The war didn't run forever. Fighting continued through the spring, with repeated rounds of ceasefire talks that kept collapsing and reigniting, oil swinging from near $100 back toward $65 and then back up again depending on whether a truce looked like it might hold that week. By early May the intense phase of the conflict had wound down, and by June a memorandum of understanding was in place aimed at reopening Hormuz for good and ending the war outright.

It didn't fully stick. In early July, Iran began asserting more control over the strait, warning ships to stick to approved routes and reportedly trying to collect transit fees, and then fired on commercial vessels in the strait. The US responded with fresh strikes, and Trump publicly declared the ceasefire over. Oil jumped again, though nowhere near the March peak, moving from around $69 to $75 for WTI in a matter of days. As of now the situation remains unsettled, with shipping still cautious and insurance costs for the region still elevated.

The Bigger Lesson

The core takeaway from all of this isn't really about any single number, whether that's $120 oil or a 95-rupee dollar. It's that the global energy system had been quietly assuming Gulf supply would always find a way through, and 2026 proved that assumption wrong in the most expensive way possible. Unlike 2022, rerouting and reserve releases weren't enough this time, because you can't reroute around a strait that's physically closed.

For policymakers who'd spent years treating energy diversification as a long-term, someday project, the conflict compressed that timeline down to weeks. For countries like India, sitting on an 85 percent import dependency, it turned energy self-sufficiency from a talking point into something closer to a survival strategy. And for anyone still betting that the Strait of Hormuz would keep behaving the way it always had, this was the year that bet stopped paying off.