Global Energy Shock: The Delayed Impact of Soaring Oil Prices
- The International Energy Agency (IEA) has characterized the current global oil and gas crisis as the most severe energy shock the world has ever experienced, warning that the...
- Fatih Birol, the head of the IEA, stated that the current disruption is more severe than the combined impact of the 1973 oil crisis, the 1979 oil crisis,...
- The center of the crisis is the Strait of Hormuz, a critical maritime corridor through which approximately one-fifth of the world's oil and gas flows.
The International Energy Agency (IEA) has characterized the current global oil and gas crisis as the most severe energy shock the world has ever experienced, warning that the full economic consequences of the war with Iran have yet to be fully realized.
Fatih Birol, the head of the IEA, stated that the current disruption is more severe than the combined impact of the 1973 oil crisis, the 1979 oil crisis, and the 2002 oil market disruption. According to the IEA, this suggests a structural rupture in global energy markets rather than a typical cyclical disruption.
Systemic Disruption at the Strait of Hormuz
The center of the crisis is the Strait of Hormuz, a critical maritime corridor through which approximately one-fifth of the world’s oil and gas flows. A near total blockade of the strait by Iran has transformed this geographic bottleneck into a strategic weapon, directly constraining the physical transit of energy supplies.
The IEA noted that unlike previous crises that were driven by political instability or production cuts, the current blockade makes it significantly more difficult to offset shortages through alternative supply routes. While the IEA has coordinated the release of strategic reserves to stabilize markets and prevent panic, these reserves are intended as short-term buffers. Continued drawdown of these reserves indicates that the crisis is not expected to resolve quickly, and further depletion could weaken future crisis response capacity and market confidence.
Economic Indicators and Market Volatility
Energy prices have surged as a result of the conflict. In March 2026, the price of oil averaged $100 a barrel. The global benchmark, Brent crude, reached a peak of $119 a barrel in late March 2026, a level not seen since July 2022. By March 31, 2026, Brent prices had settled at approximately $113 a barrel.
On April 14, 2026, the IEA reversed earlier outlooks, warning that world oil supply will shrink this year due to the disruption of exports in the Middle East. The agency also projected that global demand for oil will contract.
Analysts suggest that the markets are underestimating the long-term effects of the war. Samantha Gross, director of energy security and climate at the Brookings Institute, stated on March 30, 2026, that the brunt of the economic impact has not yet been felt.
I feel like markets are so far underestimating the effect of the war. They expect this war to go quickly, and they expect that One can go back to the world before when it’s over. And I don’t think either of those ideas is true.
Samantha Gross, Brookings Institute
Corporate Windfalls and Consumer Burden
While consumers and businesses face rising costs, major fossil fuel companies are seeing significant financial gains. An analysis by Global Witness using Rystad Energy data found that the world’s top 100 oil and gas companies earned more than $30 million every hour in unearned profit during the first month of the US-Israeli war in Iran.
Companies including Saudi Aramco, ExxonMobil, and Gazprom are among the primary beneficiaries. If the price of oil continues to average $100 a barrel, these firms are projected to make an additional $234 billion in windfall profits by the end of 2026.
These profits coincide with increased financial pressure on ordinary citizens and businesses. To mitigate the impact of high fuel prices, several countries—including Italy, Brazil, South Africa, Australia, and Zambia—have cut fuel taxes, which in turn reduces the funds available for public services.
Global Secondary Effects
The energy shock is transmitting through the global economy via multiple channels. Higher oil and gas prices increase production and transportation costs, leading to higher prices for a wide array of goods and services.
Developing economies are particularly vulnerable, as their food supply chains are highly sensitive to fuel costs, creating a compounded inflationary effect. The United Nations has raised concerns that the disruption in the Strait of Hormuz could trigger a global food crisis.