Prolonged war in the region could force Gulf energy exporters to halt production within weeks
What’s the story
Qatar‘s Energy Minister Saad al-Kaabi has warned that global oil prices could skyrocket to as high as $150 per barrel if the Middle East conflict worsens.
The warning comes amid fears of disruption to Gulf energy supplies and critical global supply routes through the Strait of Hormuz.
Al-Kaabi said a prolonged war in the region could force Gulf energy exporters to halt production within weeks, severely impacting the global economy.
Strait of Hormuz’s significance
The Strait of Hormuz is a crucial shipping corridor for global energy trade, with nearly one-fifth of the world’s crude oil and a large chunk of liquefied natural gas passing through it.
The ongoing conflict involving the US, Israel, and Iran has raised concerns over potential disruptions in this vital waterway.
Brokerages have even started outlining worst-case scenarios if the strait remains blocked for an extended period.
Impact on oil prices and production
The geopolitical tensions have already started affecting oil prices and production. Brent crude prices have surged sharply, hitting around $85 per barrel—the highest level since early 2025.
Iraq, OPEC’s second-largest producer, has reportedly cut output significantly due to threats to its export routes.
Tanker traffic through the Strait of Hormuz has also been disrupted amid attacks on vessels.
Ripple effects on global economy
Analysts warn that a prolonged supply disruption would have far-reaching effects beyond energy markets.
A sustained surge in oil prices could increase inflation in emerging economies and slow down economic growth.
Goldman Sachs estimates that a supply-driven rise in Brent prices from $70 to $85 per barrel could increase inflation across emerging Asia by about 0.7% points while reducing economic growth by roughly half a percentage point.
Current account deficits and currency pressures
Higher oil prices also tend to widen current account deficits for oil-importing economies.
Analysts at ING warn that even a 10% increase in oil prices can worsen external balances in emerging markets by 40-60 basis points, putting pressure on currencies and capital flows.
India, which imports about half of its crude oil requirements through the Strait of Hormuz, would be particularly vulnerable to a prolonged supply disruption.
Broader implications for equity markets and sectors
A prolonged supply disruption could trigger a broad risk-off reaction in equity markets.
Higher energy costs increase input prices for companies, compress corporate margins, and weaken consumer spending.
Historically, sectors like aviation, paints, chemicals, and logistics are under the most pressure from sharp oil price increases. However, upstream oil producers and energy companies typically benefit from higher crude prices.