Why This Iran War Could Push Oil Above $100

Oil Surged, Defence Stocks Jumped, and the Macro Risk Is Rising

Over the weekend, the U.S. and Israel launched strikes on Iran in what has become a major escalation across the region. The attack reportedly killed Iran’s Supreme Leader Ayatollah Ali Khamenei, along with several senior figures, and it has pushed the conflict into far more dangerous territory.

The human toll is already severe, with reports of heavy casualties across Iran, Lebanon, and Israel. What makes this even more serious is that the conflict is no longer just about retaliation. We are now looking at a much broader threat to regional stability and global trade.

The Strait of Hormuz is now right at the centre of that risk. Reports show vessels piling up in the Gulf as shipping fears intensify, while insurers pull back and operators reassess whether it is safe to move through one of the world’s most important energy chokepoints.

Iran’s posture has also clearly hardened. This no longer looks like simple coercive signalling. It looks much more like a regime acting from a position of existential defence, with threats broadening from deterrence into the possibility of direct attacks on shipping and critical infrastructure.

And the market is already feeling it. Oil has surged on the risk that supply flows could be disrupted, with Brent jumping around 8% over the weekend and moving to roughly $78 a barrel as traders priced in the possibility of a deeper energy shock.

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Oil Just Became the Market’s Biggest Middle East Risk

Right now, the market still seems to be treating this as a relatively short war. But if storage facilities start filling up and producers lose the ability to keep moving barrels, we could see forced shutdowns across the region. That is when supply tightens properly, and that is when oil has a real path into triple-digit territory. Analysts have already warned that sustained disruption in the Strait of Hormuz could push prices well above $100, with some scenarios reaching $120 if outages persist.

What is interesting is that markets still have not fully priced in that risk. Goldman Sachs CEO David Solomon said he was surprised by how “benign” the market reaction has been so far, and noted it could take a couple of weeks for investors to fully digest the economic impact.

On the ASX, though, we are already seeing where money is rotating. Defence names like DroneShield, EOS, and Austal have been moving higher, and energy stocks have also benefited as investors position for higher oil and a more volatile geopolitical backdrop.

What Could Happen to Inflation

The bigger implication is macro. What we could be facing is a second supply-side inflation shock, and that is happening while the inflation effects of tariffs are still working their way through the system. If energy stays elevated, it becomes much harder for central banks to justify further rate cuts.

That risk matters even more in Asia, where many economies are highly exposed to imported energy. China imported roughly 74% of its apparent oil consumption in 2024, while India’s oil import dependence was about 87% in 2024 and has recently been reported even higher. When oil rises, it feeds into headline inflation quickly, and that makes the policy backdrop far more difficult.