Oil Panic: The Global Economy Prepares for a Price Shock

The conflict in the Middle East has virtually halted the export of “black gold” from the Persian Gulf countries. Meanwhile, oil prices on the exchanges surged at the start of the week. Analysts warn that even if the war in the Gulf ends tomorrow, the world economy will not escape upheaval. Should the conflict become prolonged, an energy crisis will impact every country around the globe.

From the first moments after trading resumed post-weekend, the oil price curve shot upward relentlessly. One psychological barrier after another was breached: $100, $105, $110, $115 per barrel. A retreat began at $120, but it is unlikely to be long-lasting.

Market supplies of oil have noticeably decreased, and all players—Europe, India, China, Southeast Asian nations—are rushing to stockpile ahead of others. While a real shortage has yet to materialize, it is almost certain to occur soon, not necessarily due to physical scarcity, but out of fear of such scarcity looming. This concern extends not only to oil but also to gas supplies.

Susanna Streeter, Chief Investment Strategist at Wealth Club (UK):

"To abandon Russian energy supplies, Europe has turned to imports of gas from Qatar and oil from the United States. Due to attacks on Qatari facilities, which provide 15% of Europe’s gas, futures prices in the EU have sharply risen. Europe is especially vulnerable because of the war in Ukraine and the refusal to use Russian energy. We are entering an era of high volatility in energy markets. This creates colossal problems for households and businesses worldwide. With no end in sight to the conflict, we are witnessing a panic reaction in financial markets."

European gas stations now resemble post-Soviet stores of the early 1990s: endless queues, staff struggling to change rapidly fluctuating prices, figures flashing on signs as fast as seconds—quickly, uncontrollably, seemingly heading toward infinity. Virtually no country in the EU still offers fuel below two euros per liter. The cause—whether the Gulf War or insatiable traders—remains indistinguishable.

In the United States, queues are also forming, and prices are rising—though here, the fuel is produced domestically and not directly dependent on the situation in the Persian Gulf. Instead, the fluctuations are driven by the appetites of speculators, both on the stock exchanges and in retail.

Patrick De Haan, Analyst at GasBuddy (USA):

"Oil prices are rising due to the war in the Middle East. Yesterday, the average price in the US increased by 12 cents; today, double-digit growth is expected again. As oil becomes more expensive, gasoline and diesel prices go up, leading to inflation, increased wholesale prices, and higher retail costs."

Older Americans remember the 1970s oil crisis, which forced a shift from gas-guzzling cars—resembling ancient chariots—to small, fuel-efficient vehicles. Now, they wonder what to switch to this time—perhaps donkeys and ponies?

One-third of the world's oil used to pass through the Strait of Hormuz. While US President Donald Trump claimed the strait remains open for navigation, few dare to test that assertion. Currently, only a Greek-flagged tanker has transited. Most are unwilling to risk this feat again. The main consumers of Middle Eastern oil are the Pacific region—India, China, Southeast Asia. Yet, exchange prices are rising for everyone—including Europeans, who primarily purchase from American suppliers. And US oil traders show no signs of leniency toward their European partners.

Hungarian Foreign Minister Viktor Orbán has appealed to Brussels, demanding the immediate lifting of restrictions on importing Russian energy. He also sent a letter with similar demands to Ursula von der Leyen. However, Budapest’s protests are guaranteed to be ignored. Meanwhile, Brussels shows no long-term plan to resolve the crisis—mainly because no one has one yet, amid complete uncertainty about the future.

Jess Ralston, Energy and Climate Intelligence Unit (UK):

"When a serious crisis like this occurs in the Middle East, supplies break down. First, buyers scramble to purchase oil. Second, vast quantities of oil accumulate in storage. Even when the crisis ends and supplies resume, the market will remain volatile. Prices will stay high for a long time. Speculators, both on exchanges and in retail, will keep prices elevated even after the crisis subsides. So, get used to it—this will last."

The US’s quick intervention in the Gulf has failed. Many analysts believe that even this will ultimately benefit America: cheap oil will be scarce for Europe and China—its main competitors. The EU is attempting to block Russian tankers through the Baltic, and Eurasia as a cohesive economic region is on the brink of disintegration: Europe will be cut off from Asia, and China from Europe.

Meanwhile, the US will manage its oil problems easily: traders will be encouraged to keep domestic prices low by reaping enormous profits from exports. A prolonged war, instead of causing problems, will give Washington a strategic advantage—taking control of European economies, while China suffers from high oil prices, since Russian supplies can only partially resolve that issue for Beijing.

As the saying goes, in a game of unarmed players, the one with the Colt wins; in a game of armed players, the one with the bigger Colt wins. This perfectly describes the United States: the global hegemon always wins.