Bold: Global energy prices surge as Middle East conflict disrupts shipping and production. But here's where it gets controversial: the spillover could fuel inflation and slow European and Asian economies just as they’re trying to recover.
Global oil and gas prices jumped after the U.S.–Israel confrontation with Iran disrupted energy exports from the region. Iran’s attacks on ships and energy facilities, plus closed Gulf navigation, forced production cuts from Qatar to Iraq and sent energy markets into volatility.
Brent crude climbed nearly 8% on Tuesday, topping US$83 per barrel—the highest since July 2024—and has risen more than 15% since Friday. European natural gas surged as much as 40% before easing, adding to a prior 40% jump on Monday. Prices for sugar, fertilizer, and soy also moved higher.
If the conflict lasts, inflation could spike again, threatening economic recoveries in Europe and Asia. The region accounts for about a third of global oil output and nearly a fifth of natural gas, so prolonged hostilities would have broad implications.
Iraq, OPEC’s second-largest producer, warned it might need to cut production by more than 3 million barrels per day in a few days if ships cannot move freely to loading points, according to two Iraqi oil officials.
As of Tuesday, Iraq reduced output from Rumaila by 700,000 bpd and cut 460,000 bpd from West Qurna 2, the officials said.
Shipping grind to a halt as the Strait of Hormuz remained closed for a fourth day following Iran’s attacks on five ships, a choke point that handles about 20% of global oil and LNG supplies.
Vessel traffic data show crude tanker transits through Hormuz fell to four ships on March 1, from an average of 24 per day since January; three of the four were Iran-flagged.
Hundreds of tankers carrying oil and LNG are stranded near major hubs, including Fujairah in the UAE, unable to reach customers in Asia, Europe, and beyond.
Some companies are exploring alternative routes. Aramco is attempting to reroute some crude to Yanbu in the western Red Sea, but the east–west pipeline has limited capacity and could become a target for attacks by Iran’s allies, according to buyers, traders, and analysts.
On Tuesday, a fuel tank at Oman’s Duqm port was hit by a drone, and a fire erupted at the UAE’s Fujairah hub, slowing ship refueling and potentially shifting demand to other ports such as Singapore.
Qatar shut down its LNG facilities—some of the world’s largest—responsible for about 20% of global LNG exports. Saudi Arabia paused production at its largest internal refinery, while Israel and Iraq’s Kurdistan also curtailed portions of their oil and gas output.
Beyond the Middle East, Chinese refiners began idling units due to tightened crude supply, while India—one of the most oil- and gas-dependent nations—announced gas rationing for industries after Qatar’s production was halted.
Rising gasoline prices pose political risk. In the United States, pump prices recently topped $3 per gallon for the first time since November, complicating political dynamics ahead of elections and eroding the previous gains touted by leadership.
U.S. officials, including Energy Secretary and Treasury leadership, signaled plans to mitigate the impact of price spikes on American consumers and to stabilize supplies.
Europe, heavily dependent on imports for oil and gas, faces stock replenishment challenges as it contends with a cold winter and looks to diversify away from Russian supplies. The disruption elevates global shipping costs and risks tighter supply chains.
Security analysts are assessing Iran’s remaining missile and drone capabilities to gauge how long the intensity might continue. Regional powers—Saudi Arabia, UAE, Oman, and Kuwait—have intercepted most threats to energy facilities, ports, and airports, but concerns linger about dwindling stockpiles for air defense and anti-missile systems.
Reporting by Yousef Saba, Ahmed Elimam, with additional coverage from Ahmad Ghaddar, Alex Lawler, and Nidhi Verma; edited by Sharon Singleton.
