“What likely follows is a more resilient energy system, less dependent on chokepoints and marked by a loosening of traditional producer alliances.“
On February 28, 2026, the United States and Israel launched airstrikes on Iran, triggering what the International Energy Agency has since called the “largest supply disruption in the history of the global oil market.” Iran’s retaliatory closure of the Strait of Hormuz — through which roughly 20 percent of the world’s seaborne crude oil and liquefied natural gas (LNG) normally flows — sent Brent crude from approximately $72 per barrel to peaks approaching $120, with prices still hovering near $107 at the end of April. Two months in, the conflict continues with a fragile ceasefire implemented, a semi-porous U.S. naval blockade in place, and peace talks mostly stalled, producing divergent effects across regional energy markets.
The Wall Street Journal recently declared with a headline that “The Global Energy Order Is Breaking Down.” We would offer a different interpretation: Orders seldom break down in any absolute sense — they reconfigure. What we are witnessing is not a collapse, but structural reorganization, accelerated by crisis. For investors, the distinction matters enormously.
To understand why this crisis is affecting regions in markedly different ways, it helps to start with understanding the plumbing of global oil pricing. There are three major benchmarks, and each tells a different story right now.
Brent crude, based on oil produced in the North Sea (located between the United Kingdom and Norway), is the main international benchmark and is used to price roughly two thirds of globally traded oil. It has surged more than 55 percent since the war began (see Chart 1), reflecting the tightness of the global market.
West Texas Intermediate (WTI), the U.S. benchmark, has also risen sharply but trades at a discount to
Brent. This WTI-Brent spread has widened at times during the crisis and perhaps indicates America’s
relative insulation. The U.S. is not immune to global price moves though, but it is buffered by domestic
production of roughly 14 million barrels per day, and supply chains that do not depend on the Strait of
Hormuz.
Dubai/Oman crude, the third benchmark, is the pricing reference for Middle Eastern oil, sold mostly into Asia. This benchmark prices approximately 18 million barrels per day — nearly a fifth of global supply — and is based on crude produced by the UAE, Oman, and Qatar, most of it loaded inside the Strait of Hormuz. With the Strait effectively closed, the Dubai benchmark is left in a state of disarray and is where the most acute pain is concentrated. Prices have ranged from $100 to near $140 per barrel since late February in this contract.
America imports very little through Hormuz, and its Western Hemisphere supply chains are intact. Gasoline prices have risen roughly 27 percent since the war began — painful at the pump — but the U.S. energy sector is a net beneficiary of the price environment. American crude and petroleum product exports rose to over 14 million barrels per day for the week ending April 24th (see Chart 2), and long-term LNG supply agreements are being redirected toward U.S. exporters as Asian and European buyers diversify away from Persian Gulf dependence. Western Hemisphere energy producers stand to benefit greatly both in the short term and the future as energy security grows into a bigger concern.
Because the Dubai/Oman benchmark prices the crude that flows to Asia, and because that benchmark
is now deeply stressed, Asian buyers are bearing the full brunt of the disruption — in both physical
supply and pricing terms. Around 84 percent of the crude and 83 percent of LNG that normally passes
through the Strait goes to Asia, with China, India, Japan, and South Korea accounting for the lion’s
share. LNG spot prices in Asia surged over 140 percent following Iran’s strike on Qatar’s Ras Laffan,
one of the world’s largest liquefied natural gas export hubs, with damage analysts estimate will take
three to five years to fully repair. The IMF cut its 2026 growth forecast for Emerging Asia from 5.5% to
4.9%.
Europe sources less physical oil through Hormuz than Asia, but it is not insulated. Oil and LNG are global markets — when Asian buyers are desperate for cargoes, European buyers compete for the same spot market supply. Europe entered 2026 with gas storage significantly below recent norms, and natural gas prices surged roughly 50 percent after the conflict began. At least 18 European nations have already introduced consumer support measures. Europe’s deeper problem is structural: it replaced Russian gas dependency with Gulf and American LNG dependency and simply exchanged one form of geopolitical exposure for another.
The institutional casualty of this crisis may ultimately prove as significant as the physical one. On April 28, the United Arab Emirates (UAE) announced it would leave OPEC and OPEC+ effective May 1 — ending more than five decades of membership. The UAE, consistently the 4th largest OPEC producer (see Chart 3), has long chafed under the cartel’s production quotas, holding vast spare capacity it has been constrained from selling. The Iran war accelerated a break that had been building for years, and gave it political cover.
The market implications are real. Losing the UAE’s spare capacity buffer makes OPEC’s individual ability to stabilize prices in future shocks meaningfully weaker. The cartel’s production had already collapsed 27 percent in March alone — its worst decline in decades. If other members follow the UAE’s lead, the organization that has managed global oil supply for more than sixty years becomes a progressively diminished force. Others will take its place though, with the U.S. perhaps gaining power as an energy price-setting entity at a scale not seen before.
Rather than expanding strikes to Iran’s oil infrastructure, the Trump administration has pursued a strategy of economic attrition: blockade Iran’s ports, fill its storage tanks, and force a production shutdown without firing another shot. Oil wells require continuous export to maintain field pressure, and if storage fills, production must stop.
The blockade is not airtight, as some Iranian oil is still getting through, but it still functions as a squeeze on an oil-dependent economy while avoiding a more severe disruption to already elevated global oil markets that direct strikes on energy infrastructure would likely cause.
The Wall Street Journal’s framing of the global energy order “breaking down” captures the chaos but misidentifies the process. What is happening is structural reorganization. OPEC is losing its most capable spare-capacity member. Long-term LNG contracts are being rewritten away from the Gulf toward U.S. and other producers. Renewable buildout is accelerating — not from climate idealism, but from energy security necessity.
Disruption has historically been the catalyst for structural change, not the end of order. After 1973, the U.S. built the Strategic Petroleum Reserve. After 2008, the shale revolution rewrote global supply within a decade. The Strait of Hormuz will reopen. What likely follows is a more resilient energy system, less dependent on chokepoints and marked by a loosening of traditional producer alliances.
Top Row L to R: Brad Engle, Mike Sullivan, Sebrina Ivey, Christian Lewton, Jason Kitner
Bottom Row L to R: Carin Wagner, Angela Kennedy Lee, Jenny Merges, Brian Friedman, Deirdre Mcguire, Barbara Terrazas, Reed McCoy
