Military escalation between the U.S., Israel and Iran is driving oil and gas prices higher as analysts warn of risks to the Strait of Hormuz. HSBC highlighted that while Middle East spare capacity is significant, it would be inaccessible if the strait were closed, making transit through Hormuz the main concern for global energy markets.

UBS expects crude oil prices to rise across the entire curve, with the biggest moves at the front end. The bank noted that roughly 20% of global oil supply flows through the strait, and infrastructure damage could threaten about 3.3 million barrels per day of Iranian crude. Natural gas benchmarks including JKM, TTF and Henry Hub are also likely to climb higher.

In equity markets, U.S. exploration and production companies are positioned to benefit, particularly leveraged oil names. Canadian majors are also expected to gain from higher crude prices. Both banks emphasized that market outcomes hinge on whether the conflict disrupts shipping through Hormuz, a critical artery for global energy flows.