The oil market has entered a new era of instability, as the Iran conflict delivers the biggest weekly price jump since the early days of the Covid-19 pandemic. Brent crude surging more than 25% in a single week — from $72.50 to $91.89 per barrel — is not just a crisis: it is a signal that the energy market’s structural vulnerabilities remain dangerously exposed to geopolitical shocks.
The current crisis has exposed several interlocking vulnerabilities simultaneously. The Strait of Hormuz, the world’s most critical energy chokepoint, has been effectively closed to normal traffic by Iran’s threats and vessel attacks. Gulf oil storage infrastructure, designed for normal operations rather than extended blockade scenarios, is filling rapidly. Kuwait has already been forced to cut production, and consultants warn Saudi Arabia and the UAE face the same problem within 20 days.
The LNG dimension of the crisis has added another layer of complexity. Qatar, responsible for roughly 20% of global LNG exports, has suffered infrastructure damage from a drone strike and faces a recovery measured in weeks or months. This has set European and Asian buyers competing for alternative supplies, driving gas prices to three-year highs. The crisis has demonstrated, once again, how dependent the global economy remains on a handful of critical energy infrastructure nodes.
The worst-case scenarios being discussed by market participants and government officials are sobering. Qatar’s energy minister has warned that continued conflict could force all Gulf exporters to halt production, sending oil to $150 a barrel. At that price level, global inflation would surge, economic growth would stall, and the financial pressures on governments, businesses, and households would be severe. The comparison with the energy-driven inflation of the post-Covid period is impossible to avoid.
Financial markets have already processed much of this risk, but the damage has been severe. Stock markets fell sharply globally, bond yields surged, and rate cut hopes were abandoned. Airlines, among the most exposed sectors, suffered dramatic falls. The longer the conflict continues, the more the question shifts from “how bad will this get?” to “how long can the global economy absorb this before something breaks?”
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