Oil prices have climbed sharply since the United States and Israel began striking Iran on Feb. 28, underscoring how quickly a regional war can ripple through the world economy. Brent crude, the global benchmark, settled at $112.19 a barrel on March 20, its highest level since July 2022. This price spike ia directly tied to weeks of oil shipping disruptions and fighting around the Strait of Hormuz.
The concern is not only the price of crude itself, but the vulnerability of one of the world’s most important energy chokepoints. The U.S. Energy Information Administration says about one-fifth of global petroleum liquids consumption moves through the Strait of Hormuz, along with about 20% of global liquefied natural gas trade, much of it from Qatar.
As traffic through the strait has been disrupted, the effects have spread well beyond oil traders. There are now stranded ships, sharply higher war-risk insurance costs, and tanker freight rates that have surged as shipowners and insurers weigh the risks of operating in the Gulf. The International Maritime Organization has also called for a safe corridor to evacuate seafarers from vessels trapped west of Hormuz, a sign of how dangerous commercial navigation has become.
Those shipping problems can send shock waves through the broader global economy. Higher oil prices usually feed into higher prices for gasoline, diesel, jet fuel and petrochemicals. Disruptions to LNG shipments can also affect electricity markets, especially in Asia and Europe. For countries that rely heavily on imported fuel, that can mean renewed inflation pressure, higher transport costs and tighter household budgets.
Even if the U.S. stops bombing Iran, the economic aftershocks may not fade quickly. Restoring disrupted supply could take up to six months, reflecting not just the loss of oil flows but the time needed for insurers, tanker operators and traders to regain confidence that Gulf routes are safe.
There are some buffers. Saudi Arabia has redirected more crude through its Red Sea export system, easing a minor part of the shock, and the Group of Seven has said it is prepared to act to protect energy supplies and maritime security.
Nevertheless, the outlook remains fragile. Before the war, the World Bank had expected oil prices to soften in 2026 because of growing supply and slower global demand. Now, that forecast has been overtaken by conflict. For the next six months, much will depend less on whether the bombing stops than on whether the Strait of Hormuz can function normally again.
Guest:
Hugh Daigle is a professor of petroleum engineering at the University of Texas at Austin. He researches energy resources exploration and extraction, and decarbonization. He holds a bachelor’s degree from Harvard University and a PhD from Rice University.
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