Why Oil Prices Matter More Than You Think During Global Conflicts

The war involving the United States, Israel and Iran is already having economic consequences far beyond the battlefield, highlighting how central energy supplies remain to the global economy.

As the conflict disrupts exports from the Gulf region and forces some producers to scale back output, oil prices have surged, rattling financial markets and raising concerns about a broader economic slowdown.

A Global Energy Shock

At the centre of the crisis is the Strait of Hormuz, one of the world’s most critical shipping routes for energy. Roughly one-fifth of global oil supplies normally pass through the narrow waterway connecting the Persian Gulf to international markets.

With the conflict restricting ship traffic through the strait, large volumes of crude oil and liquefied natural gas are struggling to reach global buyers.

Energy producers outside the region, including the United States, Brazil and Norway, have limited capacity to rapidly increase production and offset the disruption.

Meanwhile several Gulf producers have already reduced output. Production in Iraq is reported to have fallen by more than 60%, while Kuwait and the United Arab Emirates have also scaled back their supply.

The strain is not limited to oil. About 20% of global natural gas supply has also been affected after production halted at facilities in Qatar following military attacks.

Without easy alternatives, analysts warn that shortages could emerge quickly in regions heavily dependent on imports, particularly Asia and Europe.

Energy Prices Climb

The supply shock has quickly pushed energy prices higher.

Both Brent crude and the US benchmark West Texas Intermediate surged sharply after the war began, briefly approaching $120 per barrel before falling back toward the mid-$80 range.

Even at those levels, the increase is already raising costs for businesses and households.

Natural gas prices in the United Kingdom and across Europe have nearly doubled since the start of the conflict. In the United States, petrol prices have climbed to roughly $3.50 per gallon, up from about $2.90 a month earlier.

Economists say sustained high oil prices could slow global economic growth. Analysts at Goldman Sachs estimate that if oil stabilises at $100 per barrel, it could shave about 0.4 percentage points off global growth.

Should the conflict drag on, some forecasts suggest prices could climb as high as $150 per barrel — levels that historically have been associated with severe economic strain.

Ripple Effects Across Industries

Higher energy costs affect far more than fuel bills.

Energy-intensive industries, from manufacturing to technology, face rising operating costs. Semiconductor production, for example, could be affected because major chip-manufacturing centres such as Taiwan rely heavily on imported energy.

Rising electricity and fuel costs could also complicate efforts by major US technology companies to expand the infrastructure needed to power artificial intelligence systems.

Other commodities are also being affected. The Middle East is an important supplier of aluminium, sulphur used in metal processing, and fertiliser ingredients such as urea.

As those prices increase, the impact could spread through supply chains, eventually pushing up the cost of food and manufactured goods.

Farmers in the United States are already feeling the pressure.

Harry Ott, a farmer in South Carolina who grows cotton, corn and soybeans, said his fertiliser supplier paused sales while assessing the impact of the conflict before announcing price increases.

Ott estimates the rise could add roughly $100 per acre to his fertiliser costs, potentially wiping out profits for the season.

“These are trying times,” he said, warning that farmers had not planned for such a sudden jump in expenses.

Financial Markets React

The economic risks appear greatest for countries heavily dependent on imported energy.

Stock markets in Asia and Europe have already reacted sharply. Japan’s Nikkei 225 has fallen by around 10% since the war began, while South Korea’s KOSPI has dropped roughly 15%.

In Europe, Germany’s DAX index has also declined by more than 7%.

Markets in the United States have held up somewhat better, with the S&P 500 slipping about 1.2% over the same period.

Even so, rising fuel costs could create political pressure for President Donald Trump as voters prepare for congressional elections later this year.

Analysts also say uncertainty about how long the conflict might last is contributing to volatility in energy markets.

Paul Sankey of Sankey Research warned that even if the US and Israel declare their operations complete, the situation may not fully stabilise.

“Much as the US and Israel may declare operations over and complete, the Iranians may not see it that way,” he said.

That possibility could keep global energy markets on edge long after any formal end to the conflict.

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  Adapted by ASEAN Now · Source · 09.03 2026

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