economy
March 2, 2026
Middle East crisis pushes up oil prices
Effects of extended conflict between US and Iran could also lead to higher interest rates and hit economic growth
TL;DR
- Oil and natural gas prices have surged due to escalating conflict in the Middle East.
- Brent crude oil prices increased by 8.5% ($6) to approximately $79 per barrel.
- European benchmark gas prices rose by 38% following drone attacks on QatarEnergy facilities.
- Net energy importers in Asia and Europe, including the UK, will be disproportionately affected.
- The US is expected to be more insulated due to its shale oil and strategic petroleum reserve.
- Disruption to the Strait of Hormuz, which handles 20% of global oil supplies, is a key concern.
- Tankers are avoiding the Strait of Hormuz, and insurers are reluctant to provide cover.
- Economists warn that prolonged high oil prices could force central banks to reconsider interest rate cuts.
- A worst-case scenario of a month-long blockage of the Strait of Hormuz could increase oil prices by $15 per barrel.
- This price spike occurs as policymakers were hoping to control inflation post-pandemic and the Ukraine war.
- The Bank of England's next interest rate decision is influenced by the risk of rising prices.
- Economies in the Middle East relying on tourism and business may also suffer.
- The duration and magnitude of the oil price shock are critical factors for the global economy.
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