Global energy and financial markets were thrown into turmoil this week as escalating tensions in the Middle East drove oil prices sharply higher and triggered declines across major stock exchanges.
Brent crude futures climbed above $85 per barrel for the first time since mid-2024, amid fears that the strategic Strait of Hormuz could be closed. Iranian Brigadier General Ebrahim Jabbari, an adviser to the commander of the Islamic Revolutionary Guard Corps (IRGC), warned that oil prices could soar as high as $200 per barrel if Tehran moves to shut the vital waterway.
The Strait of Hormuz, controlled in part by Iran’s navy, is one of the world’s most critical energy chokepoints, through which roughly a fifth of global oil supply passes.
Strait of Hormuz Under Threat
Iranian officials have claimed their navy now fully controls the Strait of Hormuz, with reports that multiple oil tankers have been struck by missiles and drones while attempting to transit the route. Maritime data cited by international media indicate that vessel traffic has slowed dramatically, with only a handful of tankers successfully crossing in recent days.
More than 3,000 vessels are reportedly waiting in Gulf ports for clearance to pass, while several tankers loaded with Iraqi oil remain stranded in territorial waters due to security risks. The IRGC had earlier threatened to target any tanker attempting to cross the strait.
The administration of US President Donald Trump is reportedly considering military escorts for oil and gas shipments through the corridor, as fears grow over a prolonged disruption.
Global Fuel Prices Spike
The ripple effects were felt almost immediately at petrol stations worldwide.
In the United States, average gasoline prices rose by around 10 cents in a single day to $3.11 per gallon, according to the American Automobile Association. Fuel prices have also surged across Europe, with Polish outlets describing the increases as “dramatic”.
In Ukraine, queues formed at petrol stations as the price of AI-95 petrol jumped from 63 to 72 hryvnia per litre within 24 hours. On Russia’s St. Petersburg International Commodity Exchange, gasoline, diesel, jet fuel and fuel oil all recorded significant gains, with fuel oil surging more than 27%.
Industry analysts warn that sustained instability could push fuel costs substantially higher in the coming weeks.
Stock Markets Slide
Global equity markets reacted negatively to the widening conflict.
On Wall Street, major indices on the New York Stock Exchange closed down between 0.8% and 1%. In London, the FTSE 100 fell 2.7%, reflecting investor anxiety over energy supply shocks and inflation risks.
Asian markets followed suit. The benchmark Nikkei 225 index on the Tokyo Stock Exchange plunged 3.61%, erasing gains accumulated over the past month. The decline marked the third consecutive day of losses for Japanese equities.
Meanwhile, Russia’s MOEX index edged lower in early trading on the Moscow Exchange.
Precious Metals Retreat
Despite the geopolitical turmoil, precious metals markets also experienced sharp volatility. Futures prices for platinum, palladium, gold and silver on the New York Mercantile Exchange (NYMEX) and Comex fell significantly, with platinum dropping more than 10% at one stage. Analysts attributed the declines to profit-taking and liquidity pressures amid broader market instability.
LNG Disruption Deepens Crisis
Compounding the oil shock, QatarEnergy declared force majeure on certain liquefied natural gas (LNG) shipments following strikes affecting operations in the region. The declaration effectively releases the company from contractual obligations due to events beyond its control.
The implications are far-reaching. Approximately 82% of Qatar’s LNG exports flow to Asia, where countries such as China, India, Japan, South Korea and Taiwan rely heavily on long-term supply contracts.
Industry data suggest Asian benchmark LNG prices surged nearly 40% immediately after production disruptions were reported. Indian companies have already cut gas supplies to industrial users by between 10% and 30%, signalling potential slowdowns in manufacturing across the region.
Experts note that restarting a liquefaction train after a cold shutdown typically takes at least two weeks, with a further two weeks required to reach full output. This points to a minimum four-week supply gap, assuming no additional security setbacks.
Shale Oil Constraints
Although rising prices might normally incentivise US shale producers to increase output, industry leaders caution that expansion cannot happen overnight. According to sector executives and analysts, bringing new capacity online requires months of planning and investment, and companies remain cautious about ramping up production without confidence that elevated prices will persist.
Inflation and Energy Security Concerns
European leaders have acknowledged the economic strain of the escalating crisis. Officials warn that higher oil and gas prices will feed into inflation, complicating central bank policy and placing further pressure on households and businesses.
The conflict, initially viewed as regional, is now reverberating through global supply chains, energy grids and financial markets. With the Strait of Hormuz under threat and LNG exports disrupted, the world economy faces mounting uncertainty.
Should the waterway remain constrained, analysts caution that the prospect of $200 oil may shift from rhetoric to reality.