What US Strikes On Iran Mean For Oil, Energy And Hormuz

The United States and Israel launched coordinated strikes across Iran in Tehran, Qom, Isfahan, Kermanshah, and Karaj at dawn on Saturday. President Trump announced “major combat operations” and urged Iranians to “take over your government.” Israel’s defense minister Israel Katz called it a “preemptive attack” targeting the Iranian regime itself.

Seven missiles struck the Tehran district housing Supreme Leader Khamenei’s residence. Within hours, Iran’s Revolutionary Guards fired back at four US military bases — Al Udeid in Qatar, Al Dhafra in the UAE, Al Salem in Kuwait, and the Fifth Fleet headquarters in Bahrain. One person was killed by debris in Abu Dhabi after the UAE intercepted incoming ballistic missiles.

This is the largest American military operation in the Middle East since the 2003 invasion of Iraq. It is also the first time Iranian missiles have struck Gulf Arab capitals simultaneously. That combination — regime-change intent paired with region-wide retaliation — distinguishes this conflict from prior escalation cycles in the Persian Gulf.

Eight months ago, I argued that Gulf risk had shifted from weather to climate. One missile near Al Udeid last June rewrote every insurance model, freight calculation, and LNG tender in the region. That metaphor assumed gradual adaptation was possible. What happened this morning suggests it wasn’t fast enough.

Three Variables Define This Crisis

The difference between last June and now operates on three dimensions that every board, trading desk and foreign ministry must now separate.

Scale

June’s strikes targeted nuclear facilities — a surgical, containable category. February’s strikes targeted leadership compounds, intelligence headquarters, and military-industrial infrastructure across six cities simultaneously. The US military is planning for “several days of attacks,” CNN reported. This is the largest American military mobilization in the region since 2003.

Intent

June sought degradation. February seeks transformation. Trump’s call for Iranians to “take over your government” and Netanyahu’s declaration that the strikes aim to “remove the existential threat” are regime-change language. Reza Pahlavi, the exiled son of Iran’s last shah, called it “a humanitarian intervention” within hours. Whether the regime actually falls matters less, for now, than the fact that markets must price the possibility.

Retaliation Scope

In June, Iran struck Al Udeid alone and gave advance warning. In February, the IRGC declared “all American and Israeli assets and interests in the Middle East” legitimate targets — and acted on it immediately. Missiles hit or were intercepted over Qatar, the UAE, Bahrain, Kuwait, and Jordan. A senior Iranian official told Al Jazeera there are “no red lines after this aggression.”

The Hormuz Equation Rewrites Itself in Real Time

Every energy executive reading this knows the number: 20 million barrels per day. That volume — roughly 20% of global petroleum liquids consumption, worth approximately $500 billion in annual trade — transits the Strait of Hormuz. All of Qatar’s LNG. All of the UAE’s seaborne crude. Most of Kuwait’s and Iraq’s exports.

Brent crude closed Friday at $72.48, already carrying a geopolitical premium from weeks of military buildup. Analysts expect a sharp war premium when markets open Monday. But the flat price is the least interesting variable. The structural repricing runs deeper.

War-risk insurance premiums for Gulf-transiting vessels had already doubled after June 2025 — from 0.2–0.3% of hull value to 0.5%, with panic-peak quotes touching 1%. For a Q-Flex LNG carrier valued north of $200 million, that translates to $0.10–0.15 per million BTU in structural cost — the kind of margin erosion I detailed in my earlier analysis of Hormuz on a knife-edge. Now consider what happens when missiles are actively striking the capitals that host the world’s largest US military installations. Premiums don’t double again. They enter uncharted territory — or underwriters simply stop quoting.

Iran’s parliament approved a motion to close the Strait of Hormuz after June’s strikes. The Supreme National Security Council never activated it. But February’s escalation is categorically different. Iran conducted live-fire naval exercises in the Strait on February 17. The IRGC maintains fast-attack boats, anti-ship missiles, naval mines, and semisubmersible craft designed for asymmetric warfare in these waters. Even partial disruption — a 20–30% flow reduction through mining or harassment — would send crude above $100. Full closure, however brief, enters territory no model has ever tested.

Put differently: the diversification trends I documented last July weren’t early enough.

Who Moved Before the Missiles — and Who Didn’t

Japan’s JERA had already shifted its portfolio to 30% US LNG — a share that tripled in three years. PetroChina publicly signaled it was eyeing North American volumes. India’s GAIL pursued a 26% equity stake in a US LNG project. Taiwan’s CPC signed onto the $44 billion Alaska LNG project specifically to bypass every global chokepoint from Panama to Hormuz.

Those moves now look prescient rather than cautious. But the buyers who didn’t move face acute exposure. Nearly half of India’s crude imports and 60% of its natural gas supplies transit Hormuz. China routes roughly 50% of its crude through the same strait. South Korea sources 60% of its crude via this route; Japan relies on it for close to three-quarters of its oil imports. The Asian economies that powered global growth for a generation are now calculating how many days of strategic reserves separate them from rationing.

The Gulf states themselves face a perverse irony. Saudi Arabia and the UAE hold 2–3 million barrels per day of spare production capacity — the world’s strategic buffer. Saudi shipments had already jumped to about 7.3 million bpd in the first 24 days of February, the highest since April 2023. But if Iranian missiles target export infrastructure, or if the Strait closes even temporarily, that capacity becomes stranded. The oil exists. It cannot reach markets.

The Human Capital Crisis Nobody Models

Some risks don’t appear on commodity screens. The Gulf’s economic architecture rests on approximately 31 million expatriates — over half the region’s population. Last year, I warned that skilled-worker retention was becoming a binding constraint on everything from refinery uptime to port throughput.

Missiles falling on Abu Dhabi transform that warning into operational reality. The UAE described Iran’s attack as “a dangerous escalation and a cowardly act that threatens the security and safety of civilians.” One person was killed. That number sounds small. But for the millions of expatriates — Indian, Pakistani, Filipino, British, American — who staff every critical node of Gulf infrastructure, the calculation isn’t about casualty counts. It’s about whether they stay.

India’s embassies in both Israel and Iran advised nationals to “exercise utmost caution.” The UAE’s Emiratization mandates impose escalating fines — starting at AED 8,000 monthly — for unfilled nationally designated roles. A sustained outflow of even 3% of skilled foreigners would cripple operator rosters across refineries, ports, logistics hubs, and construction sites. No asset-integrity dashboard models that scenario. As of this morning, it’s no longer theoretical.

The Regime-Change Gamble’s Second-Order Costs

Trump’s call for regime change carries the heaviest second-order risk of any variable in this crisis.

If the Iranian regime survives these strikes — damaged, humiliated, but intact — the IRGC’s deterrence calculus shifts permanently toward maximal escalation. A regime that believes it faces existential threat has no incentive to moderate. As one analyst at the International Institute for Strategic Studies noted before the strikes: “If you have a regime that thinks it’s about to go down, why would you hold back with retaliation?” Hormuz disruption, proxy activation across Lebanon, Iraq, and Yemen, and accelerated nuclear breakout all become rational responses from Tehran’s perspective.

If the regime collapses, the Iraq 2003 parallel becomes unavoidable. There is no organized political opposition inside Iran. The Pahlavi restoration narrative has no institutional base on the ground. Trump himself told Reuters last month that while Pahlavi “seems very nice,” he doesn’t know “how he’d play within his own country.” A power vacuum in a nation of 88 million, armed with ballistic missile infrastructure and proxy networks across four countries, creates cascading instability that dwarfs anything the June strikes produced.

Both outcomes — survival and collapse — are bearish for Gulf stability over any timeframe beyond 72 hours. The Columbia University Center on Global Energy Policy warned earlier this month that even a short-term price spike would “jeopardize the foundations of non-oil growth and diversification” across the GCC — growth that the IMF estimates at 3.7–3.8% and that Citi projects will accelerate to 4.5% in 2026. That diversification progress, built over decades, now sits in the path of Iranian ballistic missiles.

What Boards Should Price Now

Three scenarios define the next 90 days.

Scenario A (40% probability): Sustained strikes, managed escalation

The US and Israel conduct several days of operations, degrade Iranian military infrastructure significantly, achieve a ceasefire through backchannel mediation — likely via Oman or Qatar. Hormuz remains open but under elevated threat. Oil trades $80–90. War-risk premiums triple from pre-crisis levels and remain elevated through 2026. Gulf expatriate outflows reach 1–2%, manageable but costly.

Scenario B (35% probability): Escalation spiral

Iran’s retaliation produces meaningful US casualties. Proxy networks — Hezbollah, Kata’ib Hezbollah, Houthis — activate simultaneously. Hormuz faces partial disruption through mining or harassment. Oil spikes above $100. Global recession risk rises sharply. Gulf airspaces remain intermittently closed. Expatriate flight accelerates beyond 5%.

Scenario C (25% probability): Regime fracture

The January protest movements — the largest since 1979, met with massacres that killed thousands — reignite under the cover of external strikes. Elements of the military refuse to fight on two fronts. The regime fragments rather than falls cleanly. Hormuz becomes ungoverned rather than strategically controlled. Oil volatility exceeds anything since the 1979 revolution.

None of these scenarios is bullish for the existing energy order.

The Climate Metaphor Was Too Optimistic

Last July, I wrote that “diversification is no longer energy strategy; it’s national-security imperative.” Every data point from the intervening eight months validated that thesis — JERA’s portfolio rotation, PetroChina’s hedging, Taiwan’s Alaska bet, India’s equity stakes in US LNG.

But diversification assumes time. It assumes phased transitions across contract cycles and infrastructure buildouts measured in years. What happened on February 28 compressed that timeline to hours. Missiles struck the capitals hosting the world’s most important US military installations. Iran declared no red lines. The US declared regime change as its objective.

The security climate change metaphor assumed gradual adaptation was possible. The question confronting every energy executive, sovereign wealth fund manager, and defense planner this morning is starker: what happens when climate change triggers an extinction event — and the species that must adapt is the global energy system itself?

The answer is being written in missile contrails over Tehran, Abu Dhabi, and Doha right now.