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Middle East Strikes Lift Brent, Push Dollar and Rate Bets Higher
US strikes on Iran and suspension of oil licenses sent Brent up 6%. The dollar rallied as safe-haven demand rose and the market priced in a higher chance of two Fed rate hikes in 2026.
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The US dollar rallied as Brent crude surged 6% after American air strikes on Iran and the suspension of a temporary oil license. The attacks followed Tehran's warning over tanker routes through the Strait of Hormuz. Tehran lost a 60-day grace period for oil sales previously exempted from US sanctions. Roughly 63 million barrels already in transit lost their buyers overnight.
Before the strikes, the oil market was in a 'bearish' phase. Strait of Hormuz traffic ran 30–60 tankers a day, below February levels. Alternative routes, weaker global demand, and little appetite for rebuilding stocks had pushed Brent back toward late-February levels. A surge in supply was colliding with a market that didn't need it.
Then came the escalation. Iraqi output recovered quickly. Iranian exports had risen sharply. OPEC+ still planned gradual production increases. The new ban on Iranian oil sales, including those settled in US dollars, removed supply just as the geopolitical risk premium returned. That pushed Brent from a glut narrative to a shortage one.