What CFOs need to know about surging oil prices

CFOs have good reason to keep a close eye on the US-Israel-Iran war.

Though only a few days old, the war has already sent oil prices surging—with knock-on effects that could prove material to many businesses further down the line. Though the size of any impacts will be determined by the length of the conflict and the way it develops, it’s likely to cause at least some short-term wobbles.

Where we’re at: One-fifth of the world’s oil supply travels through the Strait of Hormuz, which, as of March 3, had been all but closed for four days, according to Reuters. Hundreds of oil tankers are stuck at ports, Reuters reported, and attacks on energy facilities have interfered with gas and oil production.

Oil prices have risen in consequence. The price of Brent crude oil opened at $85.41 per barrel on March 6, its highest level since July 2024, and 18% higher than its price of $72.48 prior to the conflict.

That said, prices haven’t spiked as much as some analysts feared. “But even with a massive strike on Iran that killed the leader of the country, at this point we’re still talking about oil prices that are well within historical norms—and much less than one would have ever expected with a strike of this magnitude,”Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University, told the New York Times. And, before the crisis, the world had an oversupply of oil, which could keep prices from rising too dramatically in the short term.

Varied scenarios: How much prices rise depends on how the conflict evolves. If exports through the Strait of Hormuz stay depressed for several weeks, oil could reach $100 a barrel, analysts at Goldman Sachs noted to clients, reported the Wall Street Journal. A war lasting three weeks could reduce the Gulf countries’ oil storage capacity to the point where they’d need to pause production, driving prices to the $120-a-barrel range, Natasha Kaneva, head of global commodities research at JP Morgan, said in a client note, CNBC reported.

Even a short disruption, though, “will almost certainly make energy more expensive worldwide,” per the New York Times. It could have various impacts, including:

Higher fuel prices: Gas prices have risen modestly since the conflict started. As of March 4, gas cost $3.198 per gallon, on average, according to the AAA; on February 25, before the conflict, it cost $2.975 per gallon. Gulf Oil analyst Tom Kloza told Axios he expects prices to reach $3.25 to $3.50 in the next few weeks.

Higher gas prices can dampen consumer confidence, but also make shipping more expensive. The price of diesel, which most commercial trucks use, reached $4.038 on March 4, compared with $3.749 a week ago.

Higher commodity prices: A third of the world’s fertilizer travels through the Strait of Hormuz, which is also a major shipping route for commodities like aluminum and sugar. Reduced traffic through the strait could lead to higher producer and consumer prices.

Interest rates staying put: Persistent high energy rates prices could keep inflation elevated, and cause institutions to hold off on lowering interest rates, Moody’s president Michael West said on March 3 at the Raymond James Annual institutional investor Conference.

CFOs will likely want to monitor the conflict and its effect on oil prices—and maybe dust off their Russia-Ukraine and supply chain-disruption playbooks, just in case.