Global Oil Market on Edge After US–Israel Strikes on Iran; Fears of Decades-Scale Energy Crisis Loom

KATHMANDU: The global oil market has entered a phase of acute volatility following coordinated military strikes on Iran by the United States and Israel, and retaliatory actions by Iran across the Gulf region. Energy analysts warn that the unfolding confrontation could trigger the most serious oil supply shock seen in decades.

International wire services report that rising military exchanges in the Gulf — the world’s most strategically vital oil-producing corridor — have injected unprecedented uncertainty into crude markets. Roughly 20 percent of global oil consumption is supplied from the Gulf region, making any disruption there a direct threat to international energy security.

Supply Shock Fears Intensify

Market participants reacted sharply after weekend attacks raised fears of reduced supply flows. Although there has been no confirmed large-scale physical damage to major oil and gas infrastructure so far, traders are pricing in escalating geopolitical risk.

Several oil companies have reportedly paused or delayed shipments through high-risk maritime corridors. At the same time, tanker freight rates have surged abruptly as insurers and shipping firms reassess war-risk premiums. The spike in logistics costs alone is expected to feed into higher crude benchmarks in coming sessions.

Crude prices had already climbed to around $70 per barrel last week — the highest level in months — and analysts anticipate further gains when markets fully absorb the scale of geopolitical risk.

Strait of Hormuz in Focus

Particular concern surrounds the Strait of Hormuz, the narrow maritime chokepoint between Iran and Oman through which nearly 20 million barrels of crude oil and petroleum products transit daily. Any disruption — whether through direct closure, tanker seizure, or missile strike — would have immediate global repercussions.

Explosions were also reported near Iran’s Kharg Island export terminal, from where roughly 90 percent of the country’s crude exports are shipped. While operations have not officially been declared shut down, the proximity of hostilities has significantly elevated market anxiety.

Energy strategists caution that if oil production facilities, pipelines, or export terminals become direct targets, the market could experience a supply shock comparable to past major geopolitical crises.

Ripple Effects on Global Economy

The war’s ripple effect extends well beyond the energy sector. A sustained rise in crude prices would push up gasoline and diesel costs worldwide, increase transportation expenses, and elevate food prices due to higher logistics costs.

For developing economies heavily reliant on imported fuel — including many in South Asia and Africa — the consequences could be severe. Rising import bills would strain foreign exchange reserves, widen trade deficits, and accelerate inflationary pressures.

Advanced economies could also face renewed inflation just as central banks attempt to stabilize post-pandemic price volatility. Higher oil prices typically complicate monetary policy, potentially delaying interest rate cuts or forcing tighter financial conditions.

Market Stability at Risk

Despite the heightened tension, the Strait of Hormuz has not been fully closed, and no confirmed catastrophic infrastructure damage has been reported. However, the risk premium embedded in oil prices continues to expand as traders weigh worst-case scenarios.

Saturday’s escalation suggests the Iran confrontation is no longer confined to a regional Middle East conflict. Energy economists warn that prolonged military exchanges could transform the situation into a full-scale global economic disruption, affecting supply chains, financial markets, and macroeconomic stability worldwide.

With global oil trade deeply interconnected, even limited hostilities in the Gulf have the capacity to reshape energy flows and economic forecasts across continents in the weeks ahead.