From $138 to $93: How a War in the Middle East Turned Oil Markets Upside Down—and What Comes Next

The Headlines

In February 2026, the Middle East erupted into conflict. The U.S. and Israel launched an air offensive against Iran on February 28 ^[1], and within days, Iran fired back—closing one of the world's most critical trade routes ^[2].

That single move sent shockwaves through global markets.

On April 7, Brent crude oil hit $138/barrel ^[1]. Gasoline at your local pump climbed to $4.16/gallon ^[3]. Oil tanker stocks surged 600% ^[4]. This wasn't just a price spike—it was chaos in the energy world.

But here's the twist: by late May, oil had collapsed nearly 20% from those highs ^[2]. Brent fell below $94/barrel ^[5]. What changed? The story of the last three months is a rollercoaster of hope, fear, and negotiations that tells you everything about how fragile global energy markets really are.

The Backstory

Let's start with why this war matters so much to you and your gas tank.

The Strait of Hormuz is a 21-mile-wide waterway between Iran and Oman. Before the conflict, about 138 vessels passed through it every single day ^[6]. The strait handled roughly 25% of the world's seaborne oil trade and 20% of the world's liquefied natural gas (LNG) ^[7].

That's a lot of oil moving through a very narrow space.

When Iran declared the strait "closed" on March 4, 2026 ^[1], they weren't bluffing. The Iranian Revolutionary Guard Corps (IRGC) issued warnings, boarded merchant ships, attacked vessels, and laid sea mines ^[7]. Oil production in the Gulf collapsed fast. By March 12, Kuwait, Iraq, Saudi Arabia, and the UAE combined lost at least 10 million barrels per day of output ^[8].

The International Energy Agency called it "the largest supply disruption in the history of the global oil market" ^[8].

Within weeks, U.S. gasoline prices soared from $2.93/gallon in mid-February to $3.70/gallon by mid-March ^[9]. By April 7, the national average hit $4.16 ^[3].

The Takes

Now here's where the story gets messy—because nobody actually knew how long this would last.

Energy executives were clearly panicked. Saudi Aramco CEO Amin Nasser told investors in May that "even if the Strait of Hormuz opens today, it will still take months for the market to rebalance" ^[10]. He warned the market wouldn't normalize until 2027 if the strait stayed blocked beyond mid-June ^[10]. That's a year-plus recovery timeline baked into oil supply chains and refinery operations.

Other analysts were slightly less doom-and-gloom, but only slightly. Bob Parker, an advisor at the International Capital Markets Association, predicted oil would stay "between $90 and $100 at least for the next couple of months," even if the strait reopens—because infrastructure damage is so severe ^[2]. He emphasized that any opening would be "only partial" ^[2].

Meanwhile, on the diplomatic side, the vibes kept shifting. On April 7–8, Trump and Iran agreed to a two-week ceasefire that promised safe passage through the strait ^[11]. Oil markets erupted downward—WTI fell more than 16% in a single day ^[11]. But by May 12, Trump was rejecting Iran's peace proposal as "garbage" and warning the ceasefire was on "life support" ^[12]. Oil rallied back up.

Then, in late May, rumors of a 60-day cease-fire extension emerged. U.S. sources told CNBC that negotiators had reached a memorandum of understanding (MOU) to extend the ceasefire and discuss Iran's nuclear program ^[13]. But Iran's state television claimed something different, saying Iran and Oman would manage traffic through the strait themselves—a claim the White House flatly denied as a "complete fabrication" ^[13].

Oil fell again.

The pattern was clear: every negotiation rumor dropped prices. Every diplomatic setback raised them.

Real Talk

Here's what emerges when you put all these facts together: the oil market doesn't care about the actual physical supply problem—it cares about the uncertainty around whether the supply problem will be solved.

In March, when the strait actually closed and production shut off, Brent averaged $117/barrel ^[1]. By May, production hadn't fully restarted, infrastructure was still damaged, and the strait was still technically blocked ^[5]. Yet oil was trading at $92.56 ^[2].

What changed? Investor confidence that someday soon a deal would happen.

This matters because it reveals something about how energy prices really work. They're not set by what's happening right now. They're set by what traders think will happen next month. Every ceasefire rumor, every Trump tweet, every White House denial—these aren't just news. They're market-moving predictions.

The other pattern: maritime traffic through the strait collapsed to just 5% of pre-crisis levels by April ^[6], yet prices have fallen nearly 20% from peak ^[2]. That suggests the market believes a broader reopening is coming—even though, as of June 5, the strait was still not fully operational ^[5].

So investors are essentially betting the physical disruption won't last. But Saudi Aramco's CEO thinks recovery takes until 2027. That's a huge gap between what markets are pricing and what executives expect.

The Bottom Line

Oil prices have performed two opposite journeys in the past three months. From February to April, they climbed 60% as a critical waterway closed and supply vanished ^[4]. From April to late May, they fell 20% as ceasefire hopes rose ^[2].

Brent is now around $93–94/barrel ^[5]. That's still much higher than pre-war levels, but investors appear to believe the worst of the supply crisis is priced in.

But here's the uncomfortable truth buried in the source material: even if diplomacy works and the strait reopens tomorrow, Saudi Aramco says the market won't rebalance until 2027 ^[10]. That's 10 more months of tangled supply chains and damaged infrastructure. And if negotiations fail? Oil could spike back toward $120+ ^[2].

For someone holding energy stocks like the XLE energy ETF (which gained 37% in Q1 2026 while the broader market fell 4.6% ^[14]), the question isn't whether oil is done moving—it's whether the rally is built on real supply recovery or just optimism that the next ceasefire rumor will hold. The source material shows those are two very different things.