Oil remains a hostage to the Middle East: every new strike brings back fears of a new price shock
The oil market in recent weeks has shown how vulnerable the global economy still is to security shocks in the Persian Gulf. Prices react to almost every new piece of information about attacks on energy infrastructure, about the safety of tanker routes, and about the possibility of further disruption to traffic through the Strait of Hormuz, the world’s most important chokepoint for oil and gas exports. And even when the market briefly calms and the price eases, the nervousness does not disappear. The reason is simple: traders, shippers, insurers, and industry assume that one new strike on a terminal, gas field, port, or tanker is enough for expectations to turn once again toward a sharp price increase. That is precisely why oil is no longer just a commodity traded on exchanges, but also an indicator of the level of geopolitical risk that spills over into inflation, transport, production, and household budgets around the world.
The latest estimates from the International Energy Agency show how serious the situation is. In the report published on March 12, 2026, the IEA states that global oil supply in March is under pressure from a major disruption, with an assessment that production and exports from the region are falling sharply because of war and security restrictions. The same report states that prices have fluctuated strongly since the outbreak of the conflict on February 28, that Brent briefly came close to 120 dollars per barrel, and then dropped toward the level of around 92 dollars. The very fact that such a wide price range opens up in a very short period of time shows that the market is not trading only the current delivery, but above all future fear. In such an environment, every military report or piece of information about the passage of ships through Gulf routes becomes almost as important for pricing as traditional data on inventories or demand.
Why the Strait of Hormuz remains the center of global energy insecurity
The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, but its importance goes far beyond geography. According to the U.S. Energy Information Administration, around 20 million barrels of oil and petroleum products per day passed through this passage in 2024, which corresponds to approximately one-fifth of global consumption and more than a quarter of global seaborne oil trade. The same source warns that for a large share of these volumes there is no real alternative. Saudi Arabia and the United Arab Emirates have part of a pipeline infrastructure that can bypass the strait, but there is nowhere near enough capacity to fully replace a closure or prolonged disruption of traffic. This means that Hormuz is not just important, but practically irreplaceable when it comes to exports by Gulf producers.
An additional problem is that the consequences do not stop with crude oil. Large quantities of liquefied natural gas, liquefied petroleum gas, petroleum products, and petrochemical feedstocks also pass through the same corridor. The U.S. EIA estimates that around one-fifth of global LNG trade in 2024 also passed through Hormuz, with the largest share ending up in Asian markets. This means that any more serious disruption to traffic through the strait does not only raise the price of crude oil, but also threatens gas prices, electricity prices, fertilizers, plastics, transport, and industrial semi-finished products. In other words, this is a shock that spreads through the entire cost chain, from the refinery and the ship to the factory, agriculture, and finally the consumer.
In an analysis published on March 10, UNCTAD warned that this is one of the world’s most critical maritime chokepoints and that the disruptions have already caused a blow to energy commodities, shipping traffic, and global supply chains. The United Nations states that the number of daily ship transits through Hormuz after the outbreak of the conflict fell almost to a standstill, with an estimated decline of 97 percent compared with the February average. This is an extremely important figure because it shows that the market is reacting not only to rhetoric and political threats, but to an actual physical disruption in the movement of goods. When ships are not passing, or are passing much less often and under much more expensive insurance conditions, the price of a barrel becomes only the first step in the overall rise in costs.
Attacks on infrastructure are changing the logic of the market
Previous tensions in the Middle East were often interpreted by markets as a political risk that could, but did not necessarily have to, end in a real supply disruption. Now the situation is different because, according to several media and institutional sources, the attacks have also hit the energy infrastructure itself. Britain’s Guardian reported on March 17 that the attacks had for the first time also hit production capacities, including the Shah gas field in the United Arab Emirates, Iraq’s Majnoon oil field, and the port and storage hub of Fujairah. Fujairah is particularly important because it represents a key outlet point for oil that bypasses the inner Gulf routes. When such a point comes under attack or under security restrictions, the market no longer assesses only how many barrels have currently disappeared, but also how vulnerable the entire export system has become.
That is precisely why the IEA analysis emphasizes that the problem is not limited to wells and fields. Refineries, gas plants, terminals, storage facilities, and maritime traffic itself are also under pressure. The agency estimates that processing capacities are also endangered because of the attacks and the impossibility of exports, especially in the production of diesel, jet fuel, and liquefied petroleum gas. This is an important difference compared with the simplified view of the market through the price of crude oil. If precisely the medium and heavier grades of crude oil and the products made from them are disrupted, the blow to the economy may be greater than the Brent benchmark alone suggests. Refineries may have trouble adapting to other grades of feedstock, airlines and logistics may feel more expensive fuel before private car owners do, and industry may enter a period of more expensive production even before price growth spills over into official inflation statistics.
Why the price sometimes falls, but fear does not disappear
At first glance, it may seem contradictory that the price sometimes weakens even after very severe news. But the market does not react linearly. One group of traders takes profits after a sharp rise, another estimates that strategic reserves and diplomatic pressure will still prevent the worst-case scenario, and a third follows short-term signals of weaker demand, especially if high prices begin to choke consumption. However, a fall in price in such circumstances does not mean a return to normality. The IEA directly warns that the further development of the market is decisively linked to the duration of the disruption and to whether passage through Hormuz will normalize. As long as that answer is unclear, volatility remains built into the price.
The latest official moves confirm this as well. On March 11, IEA member countries unanimously decided to place 400 million barrels from emergency reserves on the market, the largest coordinated action of its kind in the agency’s history. In the update of March 15, the IEA states that part of those volumes will begin reaching the market immediately, with countries in Asia and Oceania moving first, while part from Europe and the Americas is expected at the end of March. The sheer scale of the intervention shows that the leading consuming countries do not treat this crisis as a temporary disturbance. At the same time, the same agency says that this is only a buffer zone, not a permanent solution. Reserves can buy time, but they cannot replace regular and safe navigation through the world’s most important energy artery.
Inflation, transport, and industry: how geopolitical risk turns into an everyday cost
When oil becomes more expensive, the first and most visible consequence is usually more expensive fuels. But the economic effect is broader and often slower, which is why consumers feel it with a delay. A higher cost of energy commodities raises the cost of transporting goods, operating logistics chains, producing plastics, chemicals, fertilizers, and a range of industrial processes that depend directly or indirectly on petroleum products. UNCTAD warns that rising prices of energy, fertilizers, freight rates, and insurance can also increase the price of food and further intensify the cost of living, especially in more vulnerable economies. This is particularly important for countries that already have high public debt, less fiscal space, or a strong dependence on imports of energy and food inputs.
Asia is especially exposed in this crisis. According to EIA data, around 84 percent of the oil and condensate and 83 percent of the LNG that pass through Hormuz end up in Asian markets, primarily in China, India, Japan, and South Korea. Because of this, the effects of a possible longer disruption are most direct there, but they are also transmitted very quickly to Europe through higher energy prices, more expensive transport, and competition for alternative supply routes. Europe may not depend on Hormuz to the same extent as Asian importers, but it is still exposed to price spillover in the global market. When the barrel becomes more expensive for everyone, there are few countries that can remain spared.
A particular risk stems from the fact that such shocks do not appear in an empty space. At the same time, the global economy is facing slower growth, higher interest rates than in the period before the pandemic, and pressure on public finances. In such circumstances, a new energy shock acts as an additional tax on production and consumption. Higher transport costs increase the price of imports, more expensive petroleum products burden companies with thin margins, and central banks get yet another reason for caution. That is why the market is not looking only at how much a barrel costs today, but also at how a longer period of elevated prices could slow investment, industrial activity, and consumption.
The difference between forecasts and reality on the ground
In more normal circumstances, the market relies on regular assessments by OPEC, the IEA, and other institutions on global demand and supply. In its monthly report for March, OPEC still counts on global demand growth of around 1.4 million barrels per day in 2026, which shows that in its baseline scenario the organization still sees relatively firm consumption. But the crisis reality of recent weeks shows how quickly fundamental projections can come under pressure from a security shock. Because of the current conflict, the IEA has already lowered its estimate of demand growth for 2026 to 640 thousand barrels per day and warned that higher prices and weaker economic prospects are beginning to erode consumption.
That difference between OPEC’s medium-term optimism and the IEA’s crisis cuts in estimates does not necessarily mean that one side is right and the other is wrong. It rather shows how much today’s market depends on whether the underlying economic trend or an extraordinary geopolitical event is being observed. If the security situation calms and traffic through Hormuz gradually normalizes, demand growth can recover again. If, however, attacks on infrastructure, insurance restrictions, and risks to ships continue, then higher prices will turn into a brake on consumption and industry. At this moment, according to the available information, it is precisely this uncertainty that explains why daily fluctuations are so large.
Why ships, insurance, and logistics are now worth almost as much as the oil itself
Oil does not arrive on the market by itself. Even when there is enough production, safe terminals, available tankers, insurance, crews, and a port that can receive the cargo are needed. That is why today’s crisis is at the same time an energy and a logistics crisis. In the update of March 15, the IEA explicitly emphasizes that adequate insurance mechanisms and the physical protection of ships are crucial for restoring stable flows. In other words, it is not enough to declare politically that the route is open; it is necessary to create conditions in which shippers will actually agree to sail and insurers will take on the risk at a price that does not destroy economic viability.
UNCTAD adds that not only oil and gas prices are rising, but also freight rates, bunker fuel, and insurance premiums. This has a direct consequence for international trade and for the price of numerous goods that at first glance are not directly related to energy. In practice, this means that the Hormuz problem is not limited to oil-exporting and oil-importing countries. It spills over to containers, agricultural inputs, the chemical industry, the metals sector, and almost every chain that depends on maritime transport. That is why financial markets are nervous even when there is no talk of a complete physical disappearance of barrels. Sometimes it is enough for goods to be delayed, for a ship to take a longer route, or for the cost of insurance to explode, for prices to move up even without a formal shortage.
What follows if the escalation continues
The greatest risk for the market now is not only the high price, but the duration of instability. The IEA estimates that almost 20 million barrels of daily exports of crude oil and products are affected through Hormuz, with very limited possibilities for bypassing. If such a situation were to last, strategic reserves could soften the first blow, but not permanently replace the Gulf export chain. The pressure would then gradually spill over from prompt prices to the physical market, refining margins, the availability of certain grades of feedstock, and finally to consumer and industrial costs. Diesel, jet fuel, and petrochemical feedstocks would remain particularly sensitive, precisely because their production depends on qualities and logistics that cannot be replaced overnight.
In such a scenario, the political and military development of events would remain the main market indicator. One confirmation of safer passage or a more serious ceasefire could lower prices faster than classic inventory data. Likewise, a new strike on a port, terminal, refinery, or tanker could once again erase any temporary decline. That is why it can be said that oil today reacts not only to supply and demand, but to the very level of confidence that Gulf energy commodities will reach the buyer without interruption. Until that confidence returns, the market will remain nervous, and the price of a barrel will continue to serve as a daily barometer of a much broader question: how much can the global economy withstand a new major crisis on its most sensitive energy passage.
Sources:- International Energy Agency (IEA) – Oil Market Report, March 2026, assessments of supply, demand, inventories, and price movements (link)- International Energy Agency (IEA) – decision of March 11, 2026, on releasing 400 million barrels from emergency reserves (link)- International Energy Agency (IEA) – update of March 15, 2026, on the implementation of the reserve release and the regional distribution of volumes (link)- U.S. Energy Information Administration (EIA) – the importance of the Strait of Hormuz for global oil and LNG trade and limited alternative routes (link)- UN Trade and Development (UNCTAD) – Strait of Hormuz Disruptions: Implications for Global Trade and Development, an overview of the impact on trade, energy, fertilizers, and transport costs (link)- OPEC Monthly Oil Market Report, March 2026 – projection of global oil demand in 2026 (link)- The Guardian, March 17, 2026 – report on attacks on production and export energy points in the UAE and Iraq and the market reaction (link)
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