The $100 Oil Shock – How the Iran Crisis Is Rewriting the Global Economy

When a number surpasses a threshold that everyone feared but only partially anticipated, a certain kind of silence descends upon trading floors. There was a brief period of silence, perhaps four seconds, on the morning that Brent crude surpassed $103 per barrel. Then, even louder than before, the phones began ringing once more.

It wasn’t an unexpected event. Brent rose 10% in a matter of hours following the joint U.S.-Israeli strikes that killed Supreme Leader Ayatollah Ali Khamenei on February 28, 2026, from about $80 to nearly $88 before markets had had time to process the news.

There was no spike that came next. The slow, grinding ascent was fueled not only by the strikes themselves but also by something more difficult to measure: the increasing conviction that this time, the disruption might truly endure. In plain English, Goldman Sachs estimated that in a full-scale, protracted war, prices could reach $120 to $150. That figure felt like a base case all of a sudden after being filed away as a tail risk.

This crisis is particularly unsettling due to its geographic location. About 20 million barrels of oil and 20% of the world’s liquefied natural gas are transported every day through the narrow, 21-mile-wide Strait of Hormuz, which connects Iran and Oman. The majority of tanker owners did not wait to test Iran’s declaration that the waterway was closed for navigation.

Shipments were put on hold. Smaller shipping companies were unable to cover the cost due to the rapid increase in insurance premiums. Vessels already in transit began rerouting, adding days and expense to journeys that normally run like clockwork. According to Rystad Energy, a prolonged closure of Hormuz would deplete the world’s supply by 8 to 10 million barrels per day, which is more than Saudi Arabia’s East-West pipeline and Abu Dhabi’s bypass infrastructure can handle. It is somewhat inconvenient that the spare capacity that the world depends on during a crisis is located behind the chokepoint that is currently under scrutiny.

As this develops, it’s difficult to ignore the economists who have been arguing for the last three years that energy markets were overpricing geopolitical risk. That argument hasn’t held up well. According to Capital Economics, oil prices at $100 contribute between 0.6 and 0.7 percentage points to global inflation, and that’s before natural gas prices rise as they typically do.

Oxford Economics projects a more dire scenario: if the Hormuz closure pushes Brent to $130, U.S. inflation may return to 4.5% and eurozone inflation may approach 4%. That is not a problem for central banks that worked on a soft landing for more than three years. It’s a reversal.

The situation in Europe is especially awkward. It took years of cautious maneuvering, rate hikes that slowed entire national economies, and a degree of political patience that seldom lasts for long for the eurozone to reach its 2% inflation target in December 2025. For four straight meetings, the ECB maintained interest rates at 2%. The €500 billion fiscal expansion in Germany was starting to gain traction.

The Gulf then caught fire. The possibility of a second wave now confronts European manufacturers, whose energy costs are already about 40% higher than they were prior to 2022. The answer to that question will determine whether rate cuts occur in 2026 at all, but it is still unclear whether policymakers will categorize this as temporary or structural.

Although it frequently receives less column space in Western coverage, Asia is where the vulnerability is most severe. China, the biggest oil importer in the world and one of Iran’s main clients despite sanctions, is calculating strategic reserves and alternative supply chains that Beijing isn’t publicly promoting. Former White House energy adviser and Rapidan Energy founder Bob McNally pointed out the true threat: Asian governments hoard when they perceive true scarcity.

Instead of absorbing the shock, that instinct—which is perfectly reasonable on a national scale—amplifies it. Some of that behavior may already be occurring, albeit subtly, in ways that won’t be visible in the data for a few more weeks.

This is not an abstract economic debate for nations such as Pakistan. Treasury spreadsheets and emergency cabinet meetings were already illustrating this crisis. With over 80% of Pakistan’s fuel supply passing through the Strait of Hormuz and petroleum accounting for nearly 20% of the country’s total import bill, the government provided emergency fuel subsidies totaling about Rs68 billion in the early weeks of the conflict to prevent retail prices from escalating into something worse than inflation. Somewhere, that money came from. It was not surplus.

J.P. Morgan made the historical comparison that no one wanted to hear: Iranian production never fully recovered, and oil prices more than doubled following the 1979 Iranian revolution. The political event was followed by years of economic damage.

The same reasoning holds true in a different version of 2026, where the regime shifts but the infrastructure doesn’t recover, where the price shock turns into a floor, and where the military campaign ends but the supply disruption doesn’t. That might be overly negative. It might not be pessimistic enough. The $100 figure on the screen represents more than just the cost. The world economy is just starting to provide an answer to this question.