NEW YORK, July 9 — On January 3, 2020, crude oil prices surged over 4 percent, marking the largest single-day percentage gain since September 16, 2019. West Texas Intermediate crude rose to $63.05 per barrel. Brent crude climbed to $68.60 per barrel, the highest levels since September 2019.
The spike was driven by fears that the U.S.-Iran conflict could disrupt oil shipments through the Strait of Hormuz. According to the U.S. Energy Information Administration, about 20 percent of the world’s oil passes daily through that narrow waterway between the Persian Gulf and the Gulf of Oman.
Iran has threatened to close the strait in past conflicts, including during the Iran–Iraq War in the 1980s. The January 3 price jump was the largest since September 16, 2019, when oil spiked 14 percent after the Saudi Aramco attacks.
Historical patterns of crisis-driven price spikes
Historically, oil prices have risen sharply during Middle East crises. The 1973 Arab oil embargo saw prices quadruple. The 1990 Iraqi invasion of Kuwait caused prices to double.
The 2003 Iraq War pushed prices up 25 percent. By January 6, 2020, however, oil prices began to retreat.
Traders assessed that supply disruptions were unlikely. WTI fell back below $63 per barrel.
The mechanics of the January 3 spike
West Texas Intermediate, the U.S. benchmark, rose to $63.05. Brent crude, the international benchmark, hit $68.60. Both benchmarks had not traded at those levels since September 2019.
The percentage gain exceeded 4 percent on the day. The September 16, 2019 spike of 14 percent had been caused by attacks on Saudi Aramco facilities.
The January 3 move was smaller but still significant.
Supply disruption fears versus market reality
The Strait of Hormuz carries about 20 percent of the world’s oil daily, according to the U.S. Energy Information Administration. Iran’s past threats to close the strait include actions during the Iran–Iraq War in the 1980s. By January 6, traders had concluded that actual supply disruptions were unlikely.
The price retreat was swift. WTI fell back below $63.
The 1973 Arab oil embargo quadrupled prices. The 1990 Iraqi invasion of Kuwait doubled them. The 2003 Iraq War increased prices by 25 percent.
Market dynamics and trader behavior
The January 3 spike was driven by fear of supply disruption, not actual disruption. The September 16, 2019 spike after the Saudi Aramco attacks was larger because actual production was knocked offline. That event had a concrete supply impact.
The January 3 event had only a perceived risk of impact.
Long-term implications for energy security
The Strait of Hormuz chokepoint remains a structural vulnerability in global oil supply. The U.S. Energy Information Administration continues to track transit volumes through the strait. The record shows that oil markets are sensitive to Middle East geopolitical risk.
The 1973, 1990, and 2003 episodes all followed a similar pattern of sharp price increases followed by eventual stabilization. The Saudi Aramco attacks of September 2019 demonstrated that actual supply disruptions produce larger price moves than threatened ones.
The 14 percent spike on that date was more than triple the January 3 move. Iran has threatened to close the strait in the past. The U.S. Energy Information Administration data shows the strait’s importance to global oil flows.
The January 6 retreat showed that markets can quickly reassess when the immediate threat passes. The Strait of Hormuz will continue to be a flashpoint for oil prices as long as it carries 20 percent of the world’s daily oil supply.
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