The head of the International Energy Agency (IEA) has described the oil and gas crisis triggered by the blockade of the Strait of Hormuz as “more serious than the ones in 1973, 1979 and 2022 together”. Fatih Birol told French newspaper Le Figaro that the impact of the Middle East conflict on the oil market is larger than the combined force of the twin shocks of the 1970s and the fallout from Russia’s invasion of Ukraine.
Oil prices seesawed around the $110 (£83) a barrel mark on Tuesday, after President Donald Trump warned that a “whole civilization will die tonight” unless Iran makes a deal. Markets are on edge as Trump escalates his threats, setting a deadline for Iran to reopen the Strait of Hormuz. The US has reportedly hit military targets on Kharg Island, site of a key Iranian oil export terminal.
The IEA executive director warned that developing nations are most at risk, facing higher oil, gas and food prices, as well as a general acceleration of inflation. European countries, Japan and Australia would also feel an impact. The International Monetary Fund’s Kristalina Georgieva said the war would likely lead to higher inflation and slower global growth, noting that “all roads now lead to higher prices and slower growth”.
In the UK, drivers have been hit by “significant fuel price rises” over Easter, the RAC reported, with petrol rising 2.6p a litre to 157.02p and diesel up 4.2p to 189.42p. A purchasing managers’ index from S&P Global showed service sector growth was the weakest in 11 months in March, owing to falling business and consumer spending. Thomas Pugh of RSM UK said: “The inevitable conclusion… is that the UK is in for another bout of stagflation, even if the conflict ends soon.”
European markets fell on Tuesday, with London’s FTSE 100 closing 0.84% down, Germany’s DAX falling 1.1%, and France’s CAC 40 losing 0.7%. Wall Street opened lower, while Asian markets were mixed. Markets have been volatile since the US-Israel attack on Iran in February and the de facto closure of the Strait of Hormuz.
