From Iranian revolution and Gulf war to Libyan civil war: A look at 25-300% oil price rallies

What do the Arab oil embargo and the Iranian Revolution of 1970s, the Iran–Iraq war of 1980s, the Gulf war in early 1990s, the Libyan civil war of 2011, and Russia’s invasion of Ukraine since 2022 have in common? They all sent oil prices boiling. Can the ongoing US-Iran war follow the suit? Citing geopolitical "risk premium", analysts tracking oil sector said oil prices can possibly hit $100 if the war extends to more than a month, citing history of crude soaring 25-300 per cent in the past wars. Indian economy may see a near-term hit, they warned.    Iran has a market share of 2.5 per cent in global oil production, which nearly halved from a decade ago. But it is the gatekeeper of 20 per cent of global oil flows via Strait of Hormuz. For India, about 50 per cent of India’s crude oil imports and 54 per cent of LNG imports were routed through the Strait of Hormuz in FY25, analysts said. 

Iran's fresh retaliation to US-Israel strikes have revived wider fears of global trade taking a hit from a possible choking of Strait of Hormuz, which sent Brent May futures 6.5 per cent higher to $77.61 a barrel mark on Monday.

During February 1 to February 18, India's total crude imports averaged 4.85 mbpd. Oil is of particular concern as the country was filling the gap of easing Russian volumes with the Middle East suppliers, with shipments from Saudi Arabia likely reached 1-1.1 mbpd in February, the highest since April 2020. Middle East crisis, thus, poses concerns for India's oil supplies. 

ICRA said while Indian refiners may be able to source crude oil from alternate locations such as the United States, Africa and South America, elevated energy prices could result in a higher import bill.

What history suggests Over the past 50 years, oil prices have repeatedly surged 25–300 per cent during geopolitical crises, even when physical supply losses were temporary, Equirus Securities said in a detailed note. 

"Pattern is consistent: Oil overreacts first, embeds a geopolitical risk premium, and then gradually adjusts as trade flows reroute & fundamentals reassert themselves. Real forecasting challenge is not predicting the initial spike but estimating how long disruption and embedded premium will persist," it said.

The brokerage said oil markets historically, reprice aggressively when conflict risk intersects with critical supply arteries.

It gave many past instances. The 1973 Arab embargo marked a regime shift, with prices surging 300 per cent, from $3 to $12, after OPEC imposed an embargo on (9 per cent of oil supply reduced) US & Western Europe for backing Israel. 

In 1979, Iranian Revolution triggered another shock as Iran cut production, halted exports, and cancelled US contracts and price surged 180 per cent, which was 6 per cent of oil supply. 

"Supply gap was filled by rising exports from Venezuela, Nigeria, Mexico, North Sea, and Soviet Union, which became world’s largest producer but took 2-3 years," Equirus said.

The 1990 oil price shock began when Iraq invaded Kuwait, creating major global supply concerns (6-8 per cent of oil supply) and briefly lifting benchmark crude prices from $15 to $40. However, the spike proved temporary, as coalition forces restored Kuwaiti production and Saudi Arabia increased output to offset lost barrels, easing supply fears and pushing prices back toward the low-$20 range in 1991. 

"Another Iraq war began in 2003, a US.-led coalition invaded Iraq over allegations that the regime possessed weapons of mass destruction (WMDs) & Crude rose to $35 (40 per cent gain within 3-4 months). The actual disruption was limited (2–3 per cent) as compared to earlier. Once the uncertainty eased, prices quickly retraced to $23," it said.

Also Russia’s 2022 invasion of Ukraine lifted Brent from early $80s to above $120 a barrel, a 50 per cent move. Sanctions and a G7 price cap on Russian crude embedded a substantial war risk premium, estimated at $30–$47at peak, post which physical flows eventuallyfound alternate buyers like India and volumes flowed via longer or discounted channel and price normalized within six months of war.

Where is oil headed this time? JM Financial said its scenario analysis suggests that Hormuz disruption could push prices above $90 a barrel, while a broader regional conflict could take crude beyond $100 barel. For India, it said every $1 rise in crude may increase the annual import bill by $2 billion, putting pressure on the trade balance. "Stock markets are likely to move from earnings-driven to oil-driven trading in the near term," it said. Emkay Global said Iran’s response in attacking other GCC countries may have escalated the seriousness, a relatively short conflict lasting a few days to a couple of weeks is likely, given the imbalance between the two sides and the depletion of Iran’s leadership. 

"In the short term, we expect severe dislocation of oil supplies and global supply chains, with a spike in Brent crude prices to $90-100 a barre. Notably, the crude futures curve remained inverted on Friday (before the attacks), indicating that the market expects a quick resolution," it said.