Oil Jumps 18% Amid Strait of Hormuz Closure, Markets Brace for Volatility

Global crude markets entered uncharted territory as oil futures climbed 18% in a single week, marking the largest weekly gain since 2022. The surge was triggered by the effective closure of the Strait of Hormuz, a critical chokepoint for 20% of seaborne crude trade, following intensified military operations between the U.S.-Israel coalition and Iran. With shipping lanes in the region now heavily restricted, energy traders scrambled to reassess supply risk, sending CL=F to $108.70 per barrel—its highest level since early 2022. The defense and energy sectors bore the brunt of the shock. XLE, the energy sector ETF, rose 12.6% over the week, reflecting investor positioning for sustained high oil prices. Meanwhile, the CBOE Volatility Index (^VIX) climbed to 34.1, its highest since mid-2023, underscoring broad-based market unease. Analysts note that the closure has not only disrupted crude flows but also triggered a sharp re-pricing of geopolitical risk, with long-dated oil contracts showing a sustained upward bias. The U.S. Department of Energy confirmed that no major oil tankers have passed through the strait since March 2, and shipping insurers have begun imposing war risk premiums exceeding 50% on vessels transiting the region. These developments have forced refiners in Europe and Asia to seek alternative supply routes, increasing freight and logistics costs. The global energy supply chain now faces a structural strain, with potential ripple effects on inflation and central bank policy decisions.