Oil prices have further surged as the ongoing conflict in the Middle East continues to disrupt supply chains, particularly through the Strait of Hormuz.
After a brief dip on Monday, March 16, prices rebounded sharply on Tuesday, March 17, as attacks ravaged parts of the Gulf region, raising more fears of supply disruption.
According to data published on the OilPrice.com platform, Brent Crude, the global benchmark, rose by 3.3 per cent to $103.5 per barrel on Tuesday. U.S. West Texas Intermediate (WTI) crude rose by $3.14, or 3.4 per cent, to $96.64 per barrel.
According to a Reuters report, this renewed surge in oil prices comes after Iranian attacks on the United Arab Emirates (UAE). The report said Brent had previously dropped by 2.8 per cent while WTI lost 5.3 per cent after some vessels sailed through the Strait of Hormuz, a critical waterway through which about 20 per cent of global oil and gas is transported.
The conflict, which began on February 28 with joint U.S. and Israeli strikes on Iran, has resulted in thousands of casualties across several countries, especially in the Middle East. Apart from the significant closure of the Strait of Hormuz, the crisis has also led to damage of critical oil and gas facilities in different Gulf states, including Iran, Bahrain, Qatar, the United Arab Emirates, Oman, and Jordan, forcing shutdown of production and distribution hubs. The International Energy Agency, in its report for March, said the war in the Middle East is creating the largest supply disruption in the history of the global oil market.
As the war entered its third week, Iran renewed its onslaught on the UAE’s energy facilities with a fresh attack on the Fujairah port, which caused a fire, leading to the suspension of loading oil on vessels. The attacks and shutdown have forced many oil-producing Gulf states to cut down output and supply. The attacks have forced the UAE, the third-largest producer in OPEC, to reduce its output by more than half.
The disruption to shipping through the Strait of Hormuz has raised concerns about supply shortages, higher energy costs and rising inflation.
The U.S. President, Donald Trump, on Monday called on several allied nations to send warships to escort tankers through the Strait of Hormuz. However, the call has been rebuffed by several U.S. allies, including Japan, Australia, the UK, Germany, Spain, and Italy, who said they had no immediate plans to send naval ships to help protect the strategic waterway for safe passage of vessels.
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Analysts have warned that continued disruption of supply through the closure of Hormuz would further push crude oil prices up. Chief Economist and partner at SPM Professionals, Dr. Paul Alaje, said that with the direction of the conflict, it will “shape energy markets, inflation trends, trade flows, and financial stability across the world.”
Alaje stated that if shipping routes are not blocked and oil infrastructure is not severely damaged, the oil price surge might only be temporary.
For oil-exporting countries like Nigeria, the economic expert stated that higher crude prices would lead to increased government revenue and foreign exchange inflows, bringing “moderate fiscal relief.”
He, however, added that many developing economies, including Nigeria, would experience higher domestic fuel costs and inflationary pressures.
“For Nigeria, the fiscal effects could initially be positive because of higher export revenues. Government finances and foreign reserves may strengthen in the short term. Nevertheless, the domestic economy could simultaneously face rising transport costs, higher food prices, and broader inflation as global energy prices filter through local supply chains,” Alaje stated.
He called for proactive domestic reforms in Nigeria to cushion the impact of the war on the country. The measures, according to him, include strengthening domestic refining capacity, manufacturing capability, and regional trade integration.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in Mass Communication. He can be reached via @VICTOREZEJA on X
