The powder keg in the Middle East caused by the attacks by the United States and Israel on Iran threatens to undermine global economic stability in the face of the voracious rebound in energy that is already having an impact on pockets. The price of oil brenta reference in Europe, soared more than 55% in March, in the largest monthly rise in history. The barrel, which closed this Monday at 112.78 dollars, has continued its upward path in the futures market and is already above 114 dollars, its most expensive level since the beginning of July 2022. In the worst of the price crisis unleashed by the beginnings of the Russian aggression against Ukraine, the brent It was worth $127.98, a level that is no longer so far away.
The new rise in prices comes after US President Donald Trump has assured that there has been “great progress” in talks with the Tehran regime. Advances that, if not successful, would give way, as he has threatened, to attacks on Iranian energy facilities, such as the strategic enclave of Kharg Island. A challenge that is added to the possible entry on the scene of those who open the door to finishing destabilizing the Red Sea. The conflict has entered its fifth week without a solution in sight and this allows the prices of energy sources, key to inflation and growth, to reach new heights.
This Monday, Trump launched a new battery of threats against Iran on social media if “an agreement is not reached soon, which is likely, and if the Strait of Hormuz is not immediately opened to maritime traffic.” Some warnings that would involve, as detailed in touchedHours before, he had assured in an interview with the newspaper his desires without any type of filter: “To be honest with you, what I like most is taking over Iran’s oil.” As is usual with important issues, regarding the incursion into the central core of the Iranian energy industry he was ambivalent: “Maybe we will take the island of Kharg, maybe not. We have many options.” A movement that, if carried out, would imply the permanence of American soldiers on the island: “That would also mean that we would have to be there [en la isla de Kharg] for a while,” he explained.
JP Morgan analysts recognize that with each passing day, especially if there is greater involvement of other countries in the region such as the United Arab Emirates, Saudi Arabia, Qatar, Kuwait, Bahrain and Oman, there are attacks on Iranian infrastructure or the possibility of a ground offensive by the United States is activated, “the risk of escalation seems to increase. Increasingly, the question is no longer whether it will happen, but rather when,” they assert.
The conflict leaves a scenario of sharp increases in the price of energy raw materials that already affect the pockets of consumers. March will be a historic month of increases for the price of oil. The barrel of oil brent, reference in Europe, It was trading at $72 on February 27 and is now paying more than $114. The increase is around 55% in its largest monthly increase in history. The highs, close to $150, date back to July 2008, when problems in the Gulf also combined with strong demand from China.
An increase that can also be seen in the West Texas barrel, a reference in the United States, which advances 50% in the month, and in the TTF natural gas contract, which is negotiated in the Netherlands and is the reference in Europe. Its price has skyrocketed by more than 70% in March, although it is still far from the 350 euros per megawatt hour that it surpassed in 2022 with the outbreak of the war in Ukraine.
The rise in fuel prices has also been reflected in other financial markets, with falls in equities and punishment of sovereign debt. The good news is that, for now, the damage is under control in these two markets. A part of the consensus of analysts insists that the conflict will have a limited duration and that the price of oil will tend to normalize in the last months of the year.
The launch of ballistic missiles by the Houthis against Israeli territory over the weekend has endangered transit through the Bab-el-Mandeb Strait, which separates the Horn of Africa from the Arabian Peninsula and is the southern exit from the Red Sea to the Indian Ocean. That this Yemeni militia has joined the conflict in support of Iran represents a setback for Saudi Arabia’s oil exports. The Saudi kingdom and its derivatives through the Persian Gulf and the Strait of Hormuz.
Saudi Arabia’s crude oil exports through the port of Yanbu – on the Red Sea and where oil reaches via the East-West pipeline – have doubled in the last two weeks. This route has become a precious back door through which the country is managing to extract up to seven million barrels a day, its maximum capacity, but far from the 15 million barrels a day that it has stopped exporting to the world due to the closure of Hormuz. Now, this route is also threatened.
Commodity analysts at JP Morgan acknowledge in a report that, “in practice, two major corridors of global energy trade become exposed simultaneously, reducing diversion options and increasing systemic risk in supply chains.” A situation that “could add about 20 dollars per barrel to the price of oil,” they warn.
The strategists of the American investment bank emphasize that the entry of the Houthis into the conflict through direct attacks on Saudi infrastructure or maritime routes could affect the exit of Saudi Arabian exports through the Red Sea through Bab el-Mandeb and force longer and indirect maritime routes. “Round trip times to Asia could be lengthened by about 40 days, which could require more than 130 additional tanker trips to transport 4.8 million barrels of Saudi crude oil per day,” they point out.
The closure of the Strait of Hormuz remains the key. Martin Schulz, head of the International Equities Group at the manager Federated Hermes, defends that “it cannot remain closed indefinitely.” “We expect the oil price spikes to be temporary once shipping routes reopen and inventories are deployed,” he adds.
The duration of the rise in inflation and its impact on the world economy this year will depend on the evolution of the oil price in the coming weeks. Nathan Sheets, global chief economist at Citi, maintains that global GDP will grow 2.7% in 2026, although he acknowledges that “severe scenarios in which oil prices remain persistently above $100 per barrel could reduce global growth by a full percentage point and increase inflation by 2 percentage points.” Although it is stressed that these effects will be smaller than in past decades, thanks to greater flexibility in the international economy and lower energy intensity.
Experts agree that the final fate of the price of oil, and with it that of the economy of the entire planet, depends on the duration of the conflict. While Trump repeats his mantra that victory is near, analysts are already beginning to enter new data into their spreadsheets, and these show exorbitant prices in the most extreme scenario. Société Générale warns that the threshold of $150 is achievable, and Macquarie is aiming even higher, at $200.
