Oil prices do not spike 45% in six months without a very good reason. The reason, in this case, is a shooting war between the United States and Iran, and its direct threat to the Strait of Hormuz, the narrow waterway through which roughly 20% of the world’s oil supply passes every day.

Brent crude futures briefly crossed $91 per barrel on July 20, 2026, before settling back into the $88-$89 range.

What actually happened

The immediate catalyst was a combination of US military strikes on Iran, reported to have spanned nine days, and Iranian threats to disrupt shipping through the Strait of Hormuz.

WTI crude, the US benchmark, crossed $84 per barrel before pulling back to the $81-$83 range. Both benchmarks recorded gains of more than 15% in the single week leading up to July 20.

The consumer-level impact arrived quickly. The US national average gasoline price climbed above $4 per gallon on July 20, up from $3.872 the prior week. Regional prices in higher-cost markets have already crossed $5 per gallon in certain areas.

How we got here

US military operations involving Iran reportedly escalated starting around February and March of 2026, setting the stage for the more direct confrontation markets are now absorbing.

Oil prices have risen approximately 45% since the start of 2026.

The Strait of Hormuz is the linchpin of the entire situation. Every major Gulf producer, including Saudi Arabia, the UAE, Kuwait, and Iraq, depends on that passage for the vast majority of its export capacity. Iran sits on one side of it. The strait is approximately 21 miles wide at its narrowest navigable point, which means even a partial disruption scenario, whether through mining, drone attacks on tankers, or insurance market withdrawals, would send prices higher regardless of what’s sitting in strategic reserves.

What investors and traders should be watching

The $91 level on Brent is significant not just as a round number. A sustained break above that level would put crude prices at territory not consistently held since 2022, when post-pandemic demand recovery combined with the Russia-Ukraine conflict to create a different but structurally similar supply-shock scenario.

Options markets around crude futures have seen implied volatility spike alongside spot prices. The conflict has no obvious timeline for de-escalation, meaning that volatility premium could persist longer than typical geopolitical flare-ups.

For fixed income markets, sustained oil prices above $90 complicate the Federal Reserve’s calculus. Energy-driven inflation is notoriously difficult for central banks to address through interest rate policy, since rate hikes do nothing to increase oil supply. The Fed faced exactly this problem in 2022.

If US-Iran tensions move toward any form of negotiated pause, oil prices would likely give back a significant portion of the geopolitical premium quickly. The 2015 Iran nuclear deal contributed to a sustained period of lower crude prices as the prospect of Iranian supply returning to markets weighed on futures.