The surge pushed the international benchmark Brent crude briefly to nearly $120 per barrel before prices eased slightly following reports that the Group of Seven (G7) may coordinate a release of strategic oil reserves through the International Energy Agency.
The price jump marks the first time Brent has traded above $100 since the energy shocks that followed the Russian invasion of Ukraine in 2022 during the COVID-19 pandemic recovery period.
Middle East conflict driving energy fears
Analysts say the surge is directly linked to escalating hostilities involving Iran following military strikes by the United States and Israel that began on February 28.
Since the start of the conflict, oil prices have risen by roughly 50 per cent, reflecting traders’ fears that prolonged fighting could severely disrupt supplies from the Gulf region.
The situation has been worsened by disruptions in the strategically vital Strait of Hormuz, a narrow shipping route between Iran and Oman through which roughly one-fifth of the world’s oil and large volumes of natural gas normally pass.
Despite the surge in prices, U.S. Energy Secretary Chris Wright attempted to calm markets, saying global supplies remain adequate.
“The world has no shortage of oil or natural gas today,” he said during an interview with CNN.
Stock markets tumble across Asia
The sharp rise in energy prices triggered heavy losses in financial markets, particularly in Asia where many economies depend heavily on oil imports from the Middle East.
Japan’s Nikkei 225 dropped as much as eight per cent during trading before closing down about 5.8 per cent, while the broader TOPIX index also declined by more than five per cent.
Meanwhile, South Korea’s stock market fell around six per cent as investors reacted to fears that higher energy costs could slow economic growth.
Consumers already feeling the impact
Rising oil prices are already translating into higher energy costs for consumers around the world.
In the United States, the average price of gasoline climbed about 16 per cent to around $3.45 per gallon within days of the conflict escalating. Diesel prices rose even faster, increasing by roughly 22 per cent.
Natural gas prices have also surged, particularly across Europe and Asia, where they have climbed sharply since the war began. In Europe, gas prices are now about 64 per cent higher than before the conflict escalated.
Inflation fears resurface
The sudden spike in energy costs has renewed concerns about global inflation, complicating the outlook for central banks.
Investors now expect inflation to average about 4.5 per cent over the next year, compared with projections of around 2.3 per cent at the beginning of the year.
The rising price pressures place the Federal Reserve in a difficult position. While weak labour market data had raised expectations of interest rate cuts, higher oil prices could force policymakers to keep borrowing costs elevated for longer.
Bond markets have already reacted, with yields on the two-year United States Treasury securities rising to about 3.56 per cent.
Political reactions
Reacting to the developments, U.S. President Donald Trump described the spike in oil prices as temporary.
In a post on Truth Social, Trump said the increase represented a “very small price for the security and peace of the USA and the world.”
Meanwhile, G7 finance ministers were expected to hold emergency discussions on a coordinated release of strategic petroleum reserves in an effort to stabilise global markets.
Energy officials say the key uncertainty now is how long disruptions around the Strait of Hormuz will last. According to Wright, even in a worst-case scenario the disruptions could last weeks rather than months, though markets remain highly sensitive to any escalation in the conflict.