Escalating military tensions between the United States, Israel and Iran are rattling global energy markets, raising fears of supply disruptions that could trigger a significant rise in oil prices and ripple through the world economy with about 20% of global oil supply at risk via the strait of Hormuz.
According to new analysis by Coface, the confrontation has already injected a geopolitical risk premium into energy markets, even though no major physical supply disruptions have been reported so far.
The immediate reaction has been swift. At the opening of trading on March 2, benchmark Brent crude oil rose by more than 10 per cent as investors priced in the potential risks to global supply routes and energy infrastructure in the Middle East.
“The conflict is a game changer, reintroducing extreme uncertainty about the security of supplies,” said Ruben Nizard, head of sector research, Coface.
However, the credit risk analyst warned that the scale of the economic fallout will depend largely on the duration of the conflict.
“A conflict limited to a few days or weeks – the most likely scenario at present – should have a limited impact. However, if the conflict were to continue, its macroeconomic impact could be significant and go beyond the issue of energy prices,” Nizard added..
The greatest risk lies in the potential disruption of shipments through the Strait of Hormuz, one of the world’s most critical energy transit routes.
About 20 per cent of global oil consumption and nearly 30 per cent of seaborne crude shipments pass through the narrow waterway connecting the Persian Gulf to international markets.
Energy analysts say any prolonged disruption in the corridor could severely constrain global supply, as the capacity to reroute shipments through alternative routes remains limited.
In a worst-case scenario involving extended disruptions, Brent crude could rise past $100 per barrel and potentially exceed historic peaks of $122 per barrel reached during the early stages of the Ukraine conflict in 2022.
Some projections predict prices could even approach the all-time high of $147 per barrel recorded in 2008 if supply interruptions become prolonged.
While Iran is not the region’s largest oil producer, it still accounts for more than three million barrels per day of output and exports roughly 1.5 million barrels daily, much of it to Asian markets such as China.
A significant disruption to Iranian supply could therefore tighten global markets already vulnerable to geopolitical shocks.
Coface analysts also warned that the conflict could expand beyond Iran’s own production facilities.
In a more severe scenario, Tehran could target oil infrastructure in neighbouring Gulf states. Damage to pipelines, export terminals or refineries in major producers such as Saudi Arabia or the United Arab Emirates would intensify supply shortages.
Although the OPEC+ cartel retains spare capacity estimated at four to five million barrels per day, analysts note that most of this buffer is concentrated in only a few countries and could be difficult to deploy rapidly if logistics and trade flows are disrupted.
The consequences of the conflict extend beyond crude oil markets.
The Strait of Hormuz also serves as a vital shipping route for liquefied natural gas, petrochemicals, fertilisers and industrial metals such as aluminium.
Any disruption could therefore have cascading effects on global supply chains, pushing up freight costs and insurance premiums for shipping companies operating in the region.
Other strategic maritime routes, including the Bab el‑Mandeb Strait and the Suez Canal, could also face disruptions if tensions escalate across the wider Middle East.
Such developments would raise transport costs for commodities and manufactured goods, placing additional pressure on companies and economies already grappling with fragile supply chains.
Economists warn that a sustained increase in oil prices could have serious macroeconomic implications.
Coface estimates that if Brent crude were to remain above $100 per barrel for an extended period, global inflation could rise sharply, forcing central banks to reconsider plans to ease monetary policy.
The analysis points out that a prolonged $15 increase in oil prices could reduce global economic growth by around 0.2 percentage points while pushing inflation up by nearly half a percentage point.
For businesses and global traders, the uncertainty surrounding the Middle East conflict underscores the fragility of energy supply chains and the risks posed by geopolitical shocks.
With energy prices influencing transportation, manufacturing and agricultural costs, sustained volatility could ripple through multiple sectors of the global economy.
As a leading player in trade credit risk management, Coface said companies must closely monitor geopolitical developments and strengthen risk management strategies to operate in the uncertain environment.
With geopolitical tensions intensifying and energy markets on edge, analysts warn that the trajectory of the conflict in the Middle East could determine whether the current market turbulence remains a short-term shock or evolves into a broader global economic challenge.
