Markets are dangerously underestimating the potential impact of a military conflict with Iran, according to Rapidan Energy Group's Robert McNally. Speaking with Bloomberg, the energy analyst warned that the global oil market would face severe disruption if the Strait of Hormuz were to close during a war scenario.

McNally described the potential consequences as "pretty awful" for both oil and gas markets, emphasizing that the strategic waterway handles a significant portion of global petroleum shipments. The closure of this critical shipping lane could trigger immediate price spikes and supply chain chaos.

Energy traders and investors need to reassess their risk models as current market pricing appears to discount the likelihood of such a disruption. McNally's warning comes amid rising tensions in the Middle East, suggesting that the financial community may be unprepared for the economic fallout of a potential conflict with Iran.