The “ticking time bomb” of oil price volatility has not fully detonated.

Oil prices have already risen, but the worst impacts are yet to come. Research shows that the shock of fuel price fluctuations on global trade can take up to 19 months to fully manifest. Global Trade Alert has set up two scenarios.

The turbulence in energy markets triggered by the situation in the Middle East is having a sustained impact on the global trade outlook. The independent monitoring body ‘Global Trade Alert’ (GTA), through modeling analysis of historical price shocks—including those during the COVID-19 pandemic and the 2008 commodities collapse—has pointed out that if the current conflict continues to disrupt oil markets over the long term, global merchandise trade growth will significantly decelerate by the end of 2026.

Estimates from the organization indicate that under persistent volatility, global trade growth will decline by 1.75 percentage points compared to pre-conflict projections. Simon Evenett, the founder of the organization and a trade expert at IMD Business School in Lausanne, Switzerland, stated that the model results suggest the resilience of the current trading system may be overstated.

He noted, ‘We have found that an ongoing increase in fuel price volatility slows down global trade growth, with the full effects taking up to 19 months to materialize. The worst may still lie ahead.’

The research emphasizes that what impacts trade more severely is not the level of oil prices themselves but rather their instability. The analysis argues that in scenarios where oil prices remain high but relatively stable, rising income for commodity-exporting nations can partly offset the negative effects on manufacturing-exporting economies, such as Japan or the Eurozone. The report highlights:

‘A world with expensive but stable oil prices causes less harm to trade than one with unpredictable fluctuations in oil prices. What undermines merchandise trade is the volatility of oil prices, not the price level itself.’

The model establishes two scenarios:

First, a 25% increase in fuel price volatility within 12 months, roughly corresponding to the energy market conditions during the early stages of the Russia-Ukraine conflict.

Second, a doubling of volatility, approaching extreme levels seen during the 2008 commodities crisis.

Since the United States and Israel launched strikes against Iran on February 28, oil prices have continued to experience significant fluctuations. In response, Iran blocked the Strait of Hormuz, affecting approximately 20% of global oil supplies, while the U.S. countered by imposing a blockade on shipping at Iranian ports.

The price trajectory has exhibited clear signs of instability: Brent crude surged from around $70 per barrel at the onset of the conflict to nearly $120, then retreated to $86 amid positive diplomatic developments; however, following last week’s deadlock in negotiations over reopening the strait, prices climbed again above $126 per barrel.

Evernett pointed out that the current oil price volatility has increased by about 60% compared to previous levels, falling between the two scenarios mentioned above. Based on this trajectory, global trade growth is projected to decline by approximately 1.1 percentage points by the end of 2027.

Regional Divergence and Long-Term Transmission Effects

Under extreme scenarios (volatility doubling), there are significant variations in the impact across different regions. The model indicates that trade in Africa and the Middle East will drop by more than 8 percentage points, while the United States will experience a decline of nearly 1 percentage point.

By contrast, emerging Asia and Latin America as a whole have not shown notable impacts, while Japan, the Eurozone, the United States, as well as Africa and the Middle East, have all experienced varying degrees of drag on trade growth.

The World Trade Organization (WTO) forecasted in March this year that global merchandise trade growth would be 1.9% in 2026 and 2.6% in 2027, estimating that persistently high oil prices could reduce the 2026 growth rate by 0.5 percentage points. However, the latest analysis shows that if volatility persists, the actual impact may far exceed these expectations.

In terms of transmission mechanisms, the effects will not be immediately visible. Evernett explained that shipping contracts need to be renegotiated, inventories gradually depleted, and consumer confidence in key markets will also be eroded. These factors collectively lead to the gradual release of shocks several months later.

Meanwhile, initial signs are emerging at the supply chain level. Data from Drewry shows that since the outbreak of the conflict, freight rates for containers on key routes between Asia and Europe and North America have remained largely unchanged from a year ago amid weak demand, with no significant increases observed.

Overall, against the backdrop of continued oil price fluctuations, pressures on global trade growth will gradually accumulate, and the peak of the real impact may yet to come.