Three weeks into the war in Iran, global oil markets are in turmoil, with Brent crude prices surging over 50% to reach $112 per barrel.
The near-complete closure of the Strait of Hormuz and repeated attacks on Middle Eastern energy facilities have severely disrupted supply.
The increase in physical oil prices—what refiners, airlines, and consumers actually pay—has been even more dramatic.
Jet fuel prices have climbed above $200 per barrel, forcing European airlines to pass soaring costs on to passengers, while diesel and gasoline prices rise worldwide.
Trucking firms and shipping companies are already feeling the impact. Refiners in Asia are paying exorbitant premiums to secure fuel from distant markets, reflecting a mismatch between futures markets and the physical barrels that power the global economy.
You look at the paper markets; they’ve entirely disconnected from the physical markets,” said Jeff Currie, chief strategy officer at Carlyle Group. “We’re dealing with an enormous supply shock.”
The International Energy Agency has described this as the largest oil supply disruption in history, with approximately 17 million barrels of Gulf oil affected each day. Analysts caution that if the conflict continues, Brent futures could reach record highs above $147, surpassing the 2008 peak.
In response, Washington has scrambled to stabilise the markets by releasing strategic reserves and unblocking some Russian oil at sea. Treasury Secretary Scott Bessent has suggested that the U.S. might ease certain sanctions on Iranian crude, a move that left global traders astonished, given the ongoing hostilities.
The U.S. has almost exhausted its options for preventing prices from rising,” said Christof Ruhl, a former BP economist. If the strait isn’t reopened and uncertainty about physical damage persists, there isn’t much they can do.
This price shock is contributing to global inflation, putting pressure on central banks and the Trump administration. Consumers, businesses, and governments around the world are now preparing for weeks—or even months—of unprecedented energy volatility.
