The 2026 U.S.-Iran War and the Global Energy Crisis

Chapter 12: 126 Dollars a Barrel

12.1 A Timeline of Oil Price Surge

On February 27, 2026, at 4:00 p.m. London time, Brent crude for May delivery closed at $71 per barrel on the ICE Futures Exchange. Energy traders wrapped up that afternoon unremarkably. U.S. shale oil production had reached a record high of 13.58 million barrels per day, and even after OPEC+ production cut agreements, the global crude oil market remained in a state of structural oversupply. Goldman Sachs' commodities team was forecasting an average Brent crude price of $65 for 2026. Few people questioned the consensus that "the era of low oil prices would continue."

Twelve hours later, the trajectory of Tomahawk cruise missiles was traced across Iran's night sky. Operation Epic Fury had begun.

Reconstructed in numbers, the events that unfolded in the 48 hours following the outbreak of war went like this. On March 1, the Islamic Revolutionary Guard Corps (IRGC) announced a complete blockade of the Strait of Hormuz. On the same day, three oil tankers near the strait came under fire, and one caught fire off the coast of Oman. According to ship tracking data from Vortexa, only four oil tankers passed through the strait on March 1, including three Iranian vessels. It was a waterway through which an average of 24 vessels passed daily.

Brent crude hit $84.57 intraday on March 3. A 19% increase from before the war began. It was the day that Maersk, CMA CGM, and Hapag-Lloyd simultaneously announced they would suspend passage through the strait. Lloyd's List Intelligence estimated that approximately 200 international crude and petroleum product tankers were stranded inside the Persian Gulf.

On March 8, Brent crude broke through $100 per barrel. It was the first time since Russia's invasion of Ukraine in 2022. Only one commercial vessel passed through the strait that day. Just one ship in a waterway through which an average of 138 vessels transited daily. A CNBC energy correspondent was left speechless reporting this number. On the same day, Iranian drones and missiles struck the Bapco refinery in Bahrain, and explosions were reported near the Ras Tanura oil terminal in Saudi Arabia. The entire Gulf energy infrastructure had come within range.

On Monday, March 10, as markets opened, Brent crude shot to a peak of $119.50 intraday. WTI (West Texas Intermediate) also hit $119.48. Neil Atkinson, former director of oil at the International Energy Agency (IEA), appeared on CNBC and said this: "A de facto closure of the Strait of Hormuz is an event the energy market has never experienced. Unless something changes soon, we are entering an energy crisis of unprecedented proportions."

And Brent crude reached $126 per barrel.

From $71 to $126. An increase of approximately 55%. The time required was just over 20 trading days. CNBC reported that this was the largest monthly increase in the history of the Brent crude futures contract since its inception in 1988. The previous record was a 46% increase in September 1990 during the Gulf War.

While the Western benchmark recorded $126, the shock felt by Asian markets was far more severe. On March 19, Dubai crude reached $166 per barrel. It was an all-time high. According to S&P Global Platts price assessment standards. Dubai crude is the price indicator for crude oil flowing from the Middle East to Asia. With the Strait of Hormuz blocked, making physical delivery impossible, crude oil that could not be delivered was trading more than $60 higher than deliverable Brent, a distorted structure had formed.

Natasha Kaneva, head of commodities research at JPMorgan, explained this gap this way: "If the strait does not open, this price difference will not persist for long. Brent and WTI will eventually have to follow upward. As Atlantic inventory drains, the entire global market will have to reprice itself at much tighter supply levels."

Susan Bell, senior vice president of energy consulting firm Rystad, spoke more bluntly about the Dubai crude price in the Singapore market: "It is almost a fictitious price."

The gap between Brent and Dubai crude was a product of geography, not numbers. The same oil, yet a $60-per-barrel difference emerged depending on whether it had to pass through Hormuz or not. A 21-mile-wide waterway had split the global crude market in two.

There is one more number that needs to be noted. The daily price volatility of crude oil during this period. On March 23, when President Trump suggested the possibility of U.S.-Iran negotiations, Brent crude dropped $12 in a single day, from $114 to $102. And it rose again when the Iranian side denied this. Tyler Goodspeed, chief economist at ExxonMobil, said this at the CERAWeek conference: "The number of scenarios in which the strait remains closed for longer and with greater certainty far exceeds, and is far more probable than, the scenario in which the strait returns to normal traffic."

From $71 to $126, the one-month timeline proved something clear. The global crude oil market did not adjust prices gradually. The moment physical supply chains were severed, the entire price discovery mechanism built up over decades collapsed all at once.

12.2 The IEA's Declaration

On Wednesday, March 11, 2026, at the headquarters of the International Energy Agency (IEA) located at Rue de la Muette in Paris's 9th arrondissement. Shortly after an emergency video conference of energy ministers from 32 member states concluded, IEA Secretary-General Fatih Birol took the podium for a press conference.

Birol used little diplomatic rhetoric. "The challenge the oil market faces is unprecedented in scale. IEA member states have unanimously agreed to the largest emergency oil reserve release in history." Four hundred million barrels. It was the largest scale in the IEA's 52-year history since its founding.

Comparing this number to the past clarifies the scale. At the time of Russia's invasion of Ukraine in 2022, the IEA released 182.7 million barrels. Four hundred million barrels exceeds that by more than double. This is the sixth time the IEA has conducted an emergency joint release since its founding. During the 1991 Gulf War, 2005 Hurricane Katrina, 2011 Libyan civil war, and the 2022 Ukraine war, twice. And in 2026.

There was precise arithmetic behind Birol calling this "the largest supply disruption in the history of the global oil market." According to the IEA's March Oil Market Report, the total crude oil production in the Middle East fell by at least 10 million barrels per day (b/d) as of March 12 due to the war and strait blockade. As exports became impossible due to the closed strait, Kuwait and Iraq hit storage capacity limits and reduced production itself by up to 70%. Saudi Arabia and the UAE also began partial production cuts.

During the 1973 Arab oil embargo, the amount that disappeared from the market was approximately 4 to 5 million barrels per day, roughly 6 to 7 percent of global consumption at the time. During the 1979 Iranian Revolution, it was approximately 2 to 4 million barrels. The 2026 Hormuz blockade reduced a waterway through which 20 million barrels of crude oil and petroleum products passed daily to a thin stream, and combined with the production decline across the Middle East, resulted in global oil supply falling by more than 8 million barrels per day within a month. To quote the IEA directly, it was "the largest supply disruption in the history of the global oil market."

The specific distribution of the 400 million barrel release was as follows. The United States contributed 172 million barrels. That is 43 percent of the total. U.S. Secretary of Energy Chris Wright stated that "releases will begin next week and will take approximately 120 days at the planned release rate." Releasing 172 million barrels over 120 days amounts to approximately 1.4 million barrels per day. Japan committed to releasing 800,000 barrels starting March 16. Prime Minister Sanae Takahashi of Japan, which procures approximately 70 percent of its crude oil through the Strait of Hormuz, decided on early release, citing an "extremely high level of dependence on the Middle East." The United Kingdom pledged 13.5 million barrels, and Germany and Austria also participated in the release.

The market's reaction differed from Birol's expectations. Shortly after the release announcement, Brent crude fell from around $120 to about $90. A drop of roughly $30. However, this effect did not last days. On Friday, March 14, Brent crude climbed back above $100. It had risen more than 17 percent again within two days of the release announcement.

Why did an unprecedented volume of 400 million barrels fail to stabilize the market? Analysts at Macquarie ran the numbers. Four hundred million barrels represents roughly 4 days of global production and roughly 16 days of the crude oil and petroleum products passing through the Strait of Hormuz. To quote Macquarie directly, "If that does not sound like much, it is not."

CNBC presented more direct arithmetic. The U.S. release rate of 1.4 million barrels per day represents only 15 percent of the supply lost to the Hormuz blockade. The remaining 85 percent of the gap goes unfilled elsewhere. Moreover, the U.S. Strategic Petroleum Reserve (SPR) was already in a depleted state following 2022 releases. Crude oil stored in the underground salt caverns of Texas and Louisiana totaled approximately 415 million barrels. This was 58 percent of the maximum capacity of 715 million barrels. If 172 million barrels are drawn down further from here, the SPR drops to around 243 million barrels. According to NPR reporting, refilling operations at the underground salt caverns have also been delayed due to physical damage.

Birol added this at the end of the press conference: "Let me be clear: the most important thing for the restoration of stable oil and gas flows is the resumption of shipping through the Strait of Hormuz." The reserve release is a bridge. It is not a replacement for the severed artery, but rather buying time until the artery opens again.

Angie Gildea, global head of oil and gas at KPMG, summarized the situation: "There is no substitute for restoring access to the Strait of Hormuz. The tools at our disposal,strategic reserves, export diversions, floating storage,can provide some mitigation, but they are not structural solutions."

The IEA, acknowledging supply-side constraints, turned its attention to the demand side. The IEA's March report downwardly revised its 2026 global oil demand growth forecast by 210,000 barrels per day from the previous month to 640,000 barrels per day. Demand forecasts for March and April were cut by an average of more than 1 million barrels per day. Jet fuel demand plummeted due to flight suspensions at major Middle Eastern airports, and petrochemical plants began reducing operations due to supply disruptions in naphtha and LPG.

Demand destruction. With supply lines cut, there was no choice but to forcibly reduce consumption even at the cost of economic growth. It was the same logic as the Sunday driving bans and 55-mile-per-hour highway speed limits that appeared during the 1970s oil shocks. In March 2026, the IEA's 400 million barrel release was a signal that "we have pulled out our biggest weapon," and at the same time, a confession that "that weapon is not enough."

12.3 The $200 Scenario

On March 11, the day the IEA's 400 million barrel release announcement came out, a spokesman for the Islamic Revolutionary Guard Corps issued a statement: "Expect oil at $200 per barrel."

Whether hyperbole or warning. Wall Street analysts began seriously examining this figure.

Goldman Sachs moved first. The team led by Daan Struyven, co-head of commodities research and head of oil research, revised its forecasts three times after the war began. In chronological order, it went like this:

March 2 (shortly after the war began): Goldman Sachs calculated that approximately $14 per barrel of geopolitical risk premium was reflected in the current oil price. This was a price corresponding to a scenario in which the Strait of Hormuz was completely closed for four weeks and bypass pipelines operated partially. If the strait were only 25 percent blocked with pipelines operational, the additional increase would be $1 per barrel. If the strait were completely closed with no offsetting measures, $15.

March 11: Goldman Sachs significantly revised its forecast. It adopted as a base case the scenario in which the volume passing through the strait remained at only 10 percent of normal for 21 days before gradually recovering over 30 days. The previous forecast had assumed 10 days of disruption. The Brent forecast for March-April averaged $98. In the upside risk scenario, $120.

March 22: A third revision. The base case changed again. It extended the period during which the volume through the strait remained at 5 percent of normal to six weeks, then assumed gradual recovery over one month. The cumulative crude loss in this scenario exceeds 800 million barrels. The 2026 annual Brent average forecast was $85 (up from $77). The near-term March-April forecast was $110 per barrel.

Goldman Sachs had two extreme scenarios. In the "adverse scenario," the disruption lasts 10 weeks and Brent peaks at $140 before declining to $100 in the fourth quarter. In the "severely adverse scenario," the 10-week disruption is compounded by physical destruction of energy infrastructure, causing Brent to surge to $160, remaining at $115 even in the fourth quarter. Goldman Sachs warned that in extreme circumstances, prices could theoretically approach or exceed WTI's July 2008 peak of $147.25.

Barclays' forecast was more aggressive than Goldman Sachs. Barclays projected that if the war persists two more weeks, Brent could test $120, and in the upside scenario could reach $150 before month's end.

Neil Shearing's team at energy consulting firm Capital Economics looked at a longer time horizon. In a scenario where the war persists for three months, Brent could reach an average of $150 over the next six months, they analyzed.

Marko Papic, geopolitical strategist at BCA Research, presented the arithmetic more ruthlessly. In his March 28 report, he wrote: Currently (through mid-April), the war is causing the world to lose approximately 4.5 to 5 million barrels per day of crude oil, roughly 5 percent of global supply. However, by mid-April, this number doubles. Strategic reserve releases become exhausted, and Russian crude oil freed by sanction waivers also runs out. "This will be the largest supply loss in the history of crude oil."

Qatar's Energy Minister Saad al-Kaabi spoke more directly. He warned that if the war continues, oil prices could reach 150 dollars a barrel, natural gas prices could hit 40 dollars per million BTU, which could lead to "collapse of world economies."

If asked whether the figure of 200 dollars a barrel has materialized, as of March 31, the answer is no according to Brent futures. Brent crude trades around 112 dollars by late March. However, the physical market tells a different story. Dubai crude hit 166 dollars, and reports suggested it briefly touched 170 dollars. Richard Harbourne of energy consulting firm Wood Mackenzie explained the gap this way: "Everything is a function of how long the Strait of Hormuz stays closed. The entire market is updating assumptions in real time."

The disconnect between the futures market (paper market) and the physical market. This was the most important structural characteristic of the energy market in March 2026. Futures prices moved 12 dollars on a single statement from President Trump. The expression "Trump's jawboning is moving the market" became common among traders. Ben Cahill, director of the Center for Energy and Environmental Systems Analysis at the University of Texas, who attended the S&P Global CERAWeek Conference, said: "In some ways it is working. It is preventing a larger reaction in the futures market. But the reality of disruption in the physical market is hard to ignore."

Goldman Sachs, Barclays, Capital Economics, BCA Research. The point at which their outlooks converged was singular: it is not whether 200 dollars will arrive. It is how long the Strait of Hormuz will remain closed. Chevron CEO Mike Wirth said at CERAWeek: "The very real and physical consequences of the Strait of Hormuz closure are spreading across the world." Shell CEO Wael Sawan added at the same gathering: "Disruptions starting in South Asia are spreading to Southeast Asia, Northeast Asia, and as April approaches, to Europe."

200 dollars is not a number. It is a function of time.

12.4 The Specter of Stagflation

What a barrel of 126 dollars means is not merely a change in numbers on a gas station sign. It is a signal that the nightmare that destroyed Western economies in the 1970s,stagflation, where prices soar while growth stalls,has returned to the 21st century.

Economics has a rule of thumb commonly used to calculate the impact of oil prices on the global economy. According to Goldman Sachs' March 2026 report, for every 10 percent increase in oil prices, U.S. headline PCE inflation rises by about 0.2 percentage points, and GDP growth falls by 0.1 percentage points. The International Monetary Fund's estimates fall within a similar range. A sustained 10 percent rise in energy prices pushes global inflation up by 40 basis points (0.4 percentage points) and cuts economic growth by 0.1 to 0.2 percentage points.

Let me apply this rule of thumb to March 2026's reality. The rise from 71 dollars per barrel before the war to 126 dollars is approximately 77 percent. By the rule of thumb, U.S. inflation alone faces additional upward pressure of more than 1.5 percentage points. Goldman Sachs presented U.S. PCE inflation forecasts for December 2026 as 3.1 percent in the base scenario, 3.6 percent in the severe scenario, and 4.0 percent in the extremely severe scenario. Spring peaks reached 2.9 percent, 4.6 percent, and 4.9 percent respectively. The OECD projected U.S. 2026 inflation at 4.2 percent, 1.2 percentage points higher than pre-war forecasts.

Europe fared worse. The EU presented inflation forecasts ranging from 2.6 percent to 4.4 percent depending on the war's severity. Chris Williamson, chief economist at S&P Global Market Intelligence, said while announcing March eurozone PMI results: "The eurozone PMI is sounding the alarm for stagflation. The Middle East war is rapidly pushing up prices while suppressing growth." The March eurozone composite PMI stood at 50.5, dropping from 51.9 the previous month and hitting a 10-month low. It was barely above the 50 line that marks the boundary between economic expansion and contraction.

British inflation was forecast to exceed 5 percent in 2026. The highest figure in Europe.

The path of price increases does not end at gasoline and diesel prices. When crude oil prices rise, naphtha prices rise, and when naphtha prices rise, prices for plastics, packaging materials, chemical fibers, and pharmaceutical ingredients rise. But in the 2026 Hormuz crisis, the most dangerous transmission channel was fertilizer. Persian Gulf countries account for one-third of global urea exports and one-fourth of ammonia exports. Fertilizer producers in the Middle East have held a dominant position in the world market by having access to cheap natural gas as a raw material. Up to 40 percent of the world's nitrogen fertilizer exports pass through the Strait of Hormuz. As the strait closed, urea prices surged 50 percent since the war began, while ammonia rose 20 percent.

Brazil stood in the thick of this blow. Brazil is almost entirely dependent on imported fertilizer, roughly half of which enters through the Strait of Hormuz. Brazil accounts for approximately 60 percent of global soybean exports and is a major exporter of corn and sugar. If fertilizer shortages or price spikes persist, farmers have no choice but to reduce fertilizer use, which directly translates into lower yields. The shadow of a global food crisis in the second half of 2026 was beginning to take shape here.

The mechanism by which prices rise while growth simultaneously halts works like this: the surge in oil prices acts as an invisible tax on households. When fuel, heating, and electricity costs claim a larger share of income, the rest of consumption shrinks. Dining out, travel, and appliance purchases are postponed. When consumption falls, corporate revenues fall, and when revenues fall, investment and employment fall. Gasoline prices in the United States exceeded 5 dollars per gallon in the second week of March. California broke through 5 dollars per gallon first.

Carmen Reinhart, professor at Harvard Kennedy School and former chief economist of the World Bank, said: "There is growing risk that inflation will rise and growth will slow." Gita Gopinath, former chief economist of the IMF, calculated that even if oil prices in 2026 average 85 dollars per barrel, global economic growth would be 0.3 to 0.4 percentage points lower than pre-war forecasts (3.3 percent). If not 85 dollars but 126 dollars, or 150 dollars, that figure would decline far more sharply.

Comprehensive economic analysis firm SolAbility modeled GDP losses by scenario. If the war ended immediately, global GDP loss would be 590 billion dollars (0.54 percent of world GDP). If the war lasted several months, losses would grow to 3.5 trillion dollars (3.15 percent of world GDP). This calculation includes not only the shock from oil and LNG but also the spillover effects of disruptions in the fertilizer supply chain.

Gregory Daco, chief economist at EY-Parthenon, raised the probability of a U.S. recession within the next year to 40 percent. In normal times, the recession probability is 15 percent. Goldman Sachs also raised the U.S. recession probability to 30 percent, forecasting that the unemployment rate would rise from 4.4 percent in February to 4.6 percent by year-end.

Before all these numbers, central banks found themselves in an impossible position. Look at the Federal Reserve's dilemma. Inflation is soaring in the 3 to 5 percent range, so rates must be raised. Yet the economy is simultaneously slowing, so raising rates would bring forward a recession. Cutting rates would fail to control inflation. The European Central Bank postponed its scheduled rate cut on March 19. It raised inflation forecasts and lowered GDP growth forecasts. This is stagflation's definition. Prices rise, growth stops, and central banks cannot move.

Mary Daly, president of the Federal Reserve Bank of San Francisco, said in a mid-March CNBC interview: "When you combine rising prices at the gas pump with the reality that inflation is exceeding our targets, it is difficult to be reassuring to consumers." Mark Zandi of Moody's Analytics spoke more directly: "If oil prices stay around 100 dollars per barrel, gasoline prices will approach 4 dollars a gallon by next week. Inflation will accelerate rapidly, eroding consumer purchasing power and hammering consumption, GDP, and jobs."

Christopher Knittel, energy economist at MIT, highlighted the time variable: "A week or two ago, I would have said: if the war ended today, the long-term spillovers would be fairly small. But what we are seeing now is physical destruction of infrastructure. This means this war's aftermath will be long-lasting."

Lutz Kilian, energy economist at the Federal Reserve Bank of Dallas, added in the same vein: "Some damage to Qatar's LNG facilities will likely take years to repair. Kuwait's refineries and tankers in the Gulf will also require refurbishment and refueling. Even in the best scenario, the recovery process will be slow."

A barrel of 126 dollars. Behind that number lies this chain. A surge in oil prices raises gasoline and diesel prices. Fertilizer prices shoot up. Food prices rise. Logistics costs rise. All consumer goods prices rise. Households close their wallets. Companies cut investment. Employment shrinks. Yet prices keep rising. Central banks must raise rates, but doing so worsens the economy. Cutting them makes inflation worse.

There is one decisive difference between the 1970s and 2026. In the early 1980s, Fed Chair Paul Volcker raised the benchmark interest rate to 20 percent and beat inflation into submission. The price was severe recession and mass unemployment, but the size of U.S. national debt could then absorb that impact. In 2026, U.S. national debt stands around 36 trillion dollars, exceeding 120 percent of GDP. For every 1 percentage point increase in rates, annual interest costs grow by hundreds of billions of dollars. The Volcker solution is no longer an option.

The specter of stagflation is composed of numbers. 126 dollars, 166 dollars, 4.2 percent, 0.4 percentage points, 3.5 trillion dollars, 40 percent. Each of these numbers, taken separately, is merely a variable in an economic model. But when these numbers begin moving simultaneously, their sum changes reality far larger and faster than the model predicts.

As of March 31, the Strait of Hormuz remains effectively closed. Brent crude trades around 112 dollars. One month and one day have passed since the war began. The date Marco Papic of BCA Research called the "oil cliff" is approaching,mid-April. The point when strategic petroleum reserve releases are exhausted and sanctioned Russian crude hits bottom. By then, people may say that today's 126 dollars was the floor.

The numbers have not finished speaking.

Lawyer Kim Kyung-jin, artificial intelligence specialist

AI legal policy expert, former member of the National Assembly, author of numerous works

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