The Strait of Hormuz appears from a distance to be an abstract geopolitical issue, a small waterway on a map that analysts only bring up in dire circumstances. It’s different up close. Insurance companies are refusing to write coverage, shipping companies are calculating whether any price makes the risk acceptable, oil tankers are waiting in line, and crew members are unsure if their ships will be struck by a projectile. According to JPMorgan analyst Natasha Kaneva, the Strait’s effective closure in early March 2026 after US-Israeli strikes on Iran was “not just the worst-case scenario.” It was an unimaginable situation. It was unimaginable because the waterway had never been closed in its recorded history. It handles about 20% of the world’s daily oil supply, or about 14 million barrels on a typical day, and if it stops, there isn’t a fast way to replenish that flow.
Since then, the speed of the numbers has been startling. Brent crude, which was trading at about $60 per barrel in January 2026 and had increased to about $73 when the conflict began on February 28, saw a 9.2 percent increase in just one day to reach $100.46 per barrel on March 12. The previous Monday, it had reached nearly $120 intraday. The price of oil changed by about the same amount in just two weeks as it had taken years before the war; this is a compression of risk that commodity markets occasionally produce when a truly unprecedented event takes place. In a clear declaration of intent, the Iranian Revolutionary Guard Corps said, “If you can tolerate oil at more than $200 per barrel, continue this game.” In a nutshell, the entire world economy was attempting to respond in real time to the question of whether that was a real threat or a rhetorical escalation.
| Topic | Oil at $100 Again? What a Middle East Escalation Could Mean |
| Price Timeline | Brent crude pre-conflict (January 2026): ~$60/barrel. Brent crude at war start (February 28, 2026): ~$73/barrel. Brent crude by March 12, 2026: $100.46/barrel (+9.2% single day). Intraday high: ~$120/barrel (Monday, March 9). Post-Trump “very complete” comments: dropped back below $90. Analysts warned: if Hormuz remains fully closed, prices could hit $150 |
| The Strait of Hormuz | ~20% of global oil supply transits the Strait daily — approximately 14 million barrels before closure. “In the whole written history of the strait, it has never been closed, ever” (JPMorgan analyst Natasha Kaneva). Only Iran-linked commercial vessels are transiting as of mid-March 2026. Saudi Arabia is diverting to the Red Sea at record levels; that route is also threatened by Houthi attacks. IEA emergency release: 400 million barrels from member stockpiles (largest ever) |
| Downstream Economic Impact | US average petrol: rose from $2.92/gallon to above $3.50. US diesel: $3.66 → $4.78 (AAA). UK petrol: rose 6.12p to 138.95p/litre; diesel up 12.74p to 155.12p. UK European gas prices: +38% in a single day when the conflict started. UK inflation forecast revised: could end year closer to 3% vs 2% target if prices persist (OBR). Goldman Sachs: prolonged $90–100 oil would push developed market inflation 0.8% higher than expected |
| Central Bank Dilemma | Bank of England: probability of March rate cut fell from 80% to 69% within days of conflict escalating. Federal Reserve: Trump calling for rate cuts; rising oil inflation prevents them. ECB: similar bind — oil shock fuels inflation while threatening growth slowdown. “Stagflation” scenario (high inflation + low growth) raised as a plausible worst-case — the combination that the Fed has no good tools to address |
| Reference | he Guardian — Middle East Crisis Pushes Up Oil Prices and Could Drive Inflation Rises Too (theguardian.com) |
Almost immediately, the physical effects began to show up at gas stations. Average gas prices in the US increased from about $2.92 per gallon before the conflict to over $3.50, with diesel rising from $3.66 to $4.78. These increases were significant for working households and severely disruptive to operating economics for an industry like trucking. Diesel increased to 155.12p and gasoline to 138.95p per litre in the UK. Due to the Strait’s importance as a transit route for liquefied natural gas from Qatar, European gas prices were also impacted. When the conflict began, QatarEnergy halted production at two locations due to drone attacks, and the price of gas in Europe increased by 38% in a single day. These weren’t the slow, complaining cost increases that central bankers consider “manageable.” They were quick, perceptive, and immediately translated into political pressure on governments because they were visible to consumers.
Economists found it particularly difficult to explain the central bank dilemma this creates because it brings back a long-standing issue that policymakers believed they had resolved. Because the supply shock simply makes everything more expensive and simultaneously slows growth by squeezing disposable income and business margins, it differs from inflation that central banks can address by raising interest rates. The possibility of energy-driven inflation, which would obstruct rate cuts and possibly necessitate the opposite, confronted the Federal Reserve, which was already under pressure from Donald Trump to lower rates. The likelihood of the Bank of England’s March rate decision changed, and if prices held, UK inflation projections were adjusted to 3% for the year’s end. According to Goldman Sachs, sustained oil prices between $90 and $100 would cause developed-market inflation to rise by 0.8 percent, which would force central banks to make the difficult decision to combat inflation while economic growth was slowing.
Amin Nasser, the CEO of Aramco, noted that global stockpiles were already at five-year lows and threatened “catastrophic consequences” if the disruption persisted. Saudi Arabia, Kuwait, the United Arab Emirates, and Iraq reduced their crude production due to a backlog of oil in their storage that they were unable to export. 400 million barrels from member stockpiles were released as part of the IEA’s largest-ever emergency. This bought time, but not resolution, according to analysts. It would take about two weeks for maritime traffic through Hormuz to return to normal, and it would take about two months for production throughout the region to reach pre-war levels, even if the conflict ended tomorrow.
There is a sense that what transpired during those two weeks in March 2026 served as a reminder of something that the world had been able to partially forget during the decade of comparatively stable oil prices: the global economy is still based on a physical energy supply chain that passes through particular geographic chokepoints, and when those chokepoints are disrupted by conflict rather than market forces, the available tools to respond are limited and slow. Time is bought by strategic petroleum reserves. Hope is purchased through diplomatic communications. When a naval force threatens to fire on any commercial vessel trying to pass through waters that have never been closed before, neither buys certainty.
