Oil Prices Surge, Aviation Disrupt as US-Israel Strikes Kill Iran’s Khamenei

• Brent crude, already at $72.87 on February 27, is forecast to test $100 per barrel or higher as Iranian retaliation threatens the Strait of Hormuz, which handles 20% of global oil shipments.
• Aviation in the Gulf has ground to a halt, with Qatar Airways, Emirates, and Etihad canceling 50-65% of flights and major hubs like Dubai and Doha closing airspace.
• The death of Supreme Leader Ayatollah Ali Khamenei, confirmed by President Trump and Israeli sources, heightens uncertainty over Iran’s 3.3 million barrels-per-day oil output and potential power vacuum effects on energy policy.

The US and Israeli military operation launched on February 28, 2026, which resulted in the confirmed death of Iran’s Supreme Leader Ayatollah Ali Khamenei, has triggered an immediate and severe economic shock across global energy and transportation markets. With Iranian retaliation involving ballistic missiles and drones striking US bases in the Gulf—including areas near Qatar, Bahrain, and the UAE—the risk to oil supply routes and regional stability has escalated rapidly. President Donald Trump announced Khamenei’s death via Truth Social, describing it as a decisive blow, while Israeli officials cited satellite imagery and intelligence confirming the strike on the leader’s Tehran compound. This political decapitation, combined with physical damage to Iranian infrastructure, has markets bracing for sustained volatility in oil, aviation, and related sectors.

Oil markets are at the epicenter of the fallout. Iran produces about 3.3 million barrels per day, roughly 3% of global supply, but its strategic control over the Strait of Hormuz—through which one-fifth of the world’s crude passes—amplifies the impact far beyond its own output. Pre-strike, Brent crude closed at $72.87 per barrel on February 27, already up 8.16% over the past month amid rising tensions. Post-strike assessments from major banks point to an immediate spike: Barclays anticipates Brent testing $100 on Monday’s open, a potential 37% jump from recent levels, while Reuters and other outlets forecast prices climbing toward $100 in a prolonged scenario. Iranian threats to close the strait have already led to tanker avoidance, with shipping data showing vessels queuing at entrances. A full disruption could remove up to 20% of global supply, echoing historical precedents like the 1979 Iranian Revolution when prices more than doubled and triggered recessionary pressures.

The aviation sector has suffered instant operational chaos. Qatar Airways suspended nearly all flights to and from Doha, citing safety after explosions and missile activity over the capital; reports indicate 60% of its schedule affected, with Hamad International Airport closed temporarily. Emirates canceled around 65% of services, Etihad 50%, and Dubai International—the world’s busiest for international traffic—halted operations entirely. These hubs serve as critical connectors for energy executives, cargo shipments of oilfield equipment, and passenger traffic tied to Gulf economies. Lufthansa, Air France, and Turkish Airlines have also curtailed regional routes. The cumulative effect extends beyond immediate cancellations: insurance premiums for flights and hulls in the Middle East have surged, and supply chains for petrochemicals and refined products face delays.

Equity markets opened the weekend under heavy cloud, with analysts predicting a 1-2% drop in global indices when trading resumes. Risk-off flows are boosting safe-haven assets: gold prices are climbing, and the US dollar is strengthening against most currencies. Defense and energy stocks, however, are positioned for gains as investors bet on higher military spending and elevated crude values. Deutsche Bank and Natixis economists highlight secondary effects on inflation, estimating that a sustained $10-20 per barrel oil increase could add 0.6-0.7 percentage points to global price pressures. This development effectively removes near-term expectations for monetary easing, with MarketWatch noting that prospects for Federal Reserve rate cuts in 2026 are “evaporating before our very eyes.”

Gulf economies, heavily reliant on energy exports and open trade routes, face compounded risks. Saudi Arabia, the UAE, and Qatar—already hit by stray missile impacts or airspace threats—have condemned the Iranian response while reinforcing defensive postures around key facilities. Prolonged conflict could deter foreign investment in diversification projects like Saudi Vision 2030 or Qatar’s hosting ambitions, while higher energy costs ripple into global manufacturing, shipping, and consumer prices. JPMorgan analysts caution that regime instability in Iran could lead to longer-term policy shifts affecting output, potentially sustaining elevated prices even if immediate fighting subsides.