A deepening energy crisis, triggered by the closure of the Strait of Hormuz, is pushing oil prices towards $200 per barrel, sending shockwaves through global markets and stoking fears of inflationary spirals across the US, Europe, and beyond.
Oil markets on edge
The sudden closure of the Strait of Hormuz has slashed global oil supplies by approximately 11 million barrels per day. With current demand levels, this creates a deficit of around 9 million barrels — more than the combined oil consumption of the United Kingdom, France, Germany, Spain, and Italy, according to market analysts.
Temporary releases from strategic reserves and the US lifting sanctions on Russian and Iranian crude have only eased pressures briefly. Market participants in the United States are now contemplating scenarios in which oil prices could surge to $200 per barrel if the situation persists.
Gas supplies under threat
Around one-fifth of global LNG supplies pass through the Strait of Hormuz. Unlike oil, alternative delivery routes for gas are extremely limited, and strategic reserves are insufficient to offset shortages.
QatarEnergy, operator of the world’s largest LNG plant, has reported a force majeure following drone attacks, with repair works potentially taking up to five years. Analysts warn that prolonged disruption could exacerbate global energy insecurity.
Economic fallout
Bloomberg Economics warns that even at $110 per barrel, the economic impact is already apparent. In March, US consumer inflation rose to 3.4% year-on-year, up from 2.4% in February, primarily driven by fuel price hikes.
If the Strait remains closed into Q2, oil prices could spike to $170 per barrel, potentially doubling inflationary pressure. Bloomberg predicts such conditions could trigger stagflation, influence central bank policy decisions, and affect outcomes in the US midterm elections.
Inflation across Europe
Major energy consumers are taking pre-emptive measures. Japan has appealed to the International Energy Agency to consider coordinated releases from strategic reserves to mitigate rising costs.
In Germany, energy-driven inflation has hit households hard. In Bavaria, March inflation reached 2.8%, up from 1.9% in December 2025, with similar jumps across North Rhine-Westphalia, Lower Saxony, and Baden-Württemberg. The ifo Institute reports that the number of companies planning price increases is at its highest in three years, signalling mounting cost pressures on consumers.
Irish consumer inflation rose to 3.6% in March, the highest in two and a half years. Month-on-month energy prices jumped 11%, though core inflation excluding energy remained stable at 2.6%.
In Spain, inflation accelerated to 3.3% year-on-year in March, driven mainly by fuel costs, according to INE. Analysts expect the European Central Bank (ECB) to consider interest rate hikes in response.
ECB President Christine Lagarde has warned that escalating energy tensions in the Middle East reduce prospects for a quick stabilisation, signalling readiness to act decisively should energy prices fuel inflation across Europe.
Turkey faces soaring energy import costs, potentially reaching $100 billion, intensifying inflationary pressures. Rising energy prices are hitting industry and logistics first, before spreading across the economy, according to Turkish economist Özlem Tekindor. Annual inflation in Turkey reached 31.53% in February, driven by higher prices for food, housing, transport, and utilities.
With strategic reserves and alternative routes offering limited relief, the global energy landscape is increasingly precarious. Economists warn that without rapid resolution, the ripple effects on inflation, central bank policies, and everyday consumers will intensify worldwide.
