Oil wars: how the Middle East is reigniting the global appetite for risk

In 2025, oil will once again go beyond being a mere commodity asset and become an instrument of geopolitical influence and a potential trigger for global economic shifts. After almost two years of calm, a series of dramatic events in the Middle East has upset the delicate balance. The escalation of the conflict between Israel and Iran, strikes on Iranian nuclear facilities, , rising tensions around the Strait of Hormuz and the US show of force have once again brought geopolitics to the forefront of the energy market. The Strait of Hormuz as a Point of Global Vulnerability The Strait of Hormuz, a narrow 38-mile-long sea passage between Iran and Oman, is a critical node in the global energy system. About 20% of the world's oil supplies and 17% of LNG pass through it daily. Any restriction or blockage of shipping in this region instantly causes price spikes. This was the case in 2019, when Iran only hinted at the possibility of closing the strait after a series of attacks on tankers. This is happening now. In early June 2025, amid news of a parliamentary vote in Iran on the blockade of the Strait of Hormuz, the price of Brent soared by more than $7. Read also Saudi Arabia's oil revenues fall to lowest level in almost four years The scale of the threat is hard to exaggerate. A complete blockade of the strait could stop exports of up to 20 million barrels per day, which is almost a fifth of global oil consumption. In this case, the price of Brent could easily exceed $100 per barrel, and in the event of a full-scale confrontation, it could be much higher . Risks are exacerbated by the fact that alternative routes through the Red Sea and the Suez Canal are unable to cope with such volumes. In addition, they themselves remain vulnerable: Houthi attacks in the Red Sea in 2022 forced up to 25% of ships to change course. Oil between geopolitics and budgetary interests The ceasefire initiated by Trump, after its announcement, significantly reduced geopolitical risks in the oil market. But the deal looks fragile. If tensions rise again, price hikes are quite possible. However, such fluctuations are likely to be short-lived - unless the conflict leads to serious disruptions in global oil supplies. At present, the likelihood of such a scenario seems low. The overall outlook for oil prices continues to be based on the balance of supply and demand. Prices are expected to stabilize at around $80 per barrel in the next 6-12 months. No significant supply growth is expected, so a market oversupply is unlikely . But there is an important detail. During the escalation of the conflict in May-July 2025, OPEC+ countries suddenly increased production by 411,000 barrels per day. Initially, this lowered prices, but the escalation between Iran and Israel quickly changed the situation. Read also Israel's War with Iran: How Crypto Reacts Oil-producing countries in the region are in a difficult position. On the one hand, they need budget stability. For example, for Saudi Arabia, the breakeven price in 2024 was $96.2 per barrel. On the other hand, political instability and military risks make long-term planning almost impossible. One of the most vulnerable companies in this context is BP. Approximately 25% of its production comes from the Middle East. If the conflict escalates, the company's shares fluctuate more strongly: every dollar of change in the Brent price affects earnings per share by 2-3.5%. But companies with a minimal presence in the region, such as Galp or Equinor, are holding up better. They are now perceived as "defensive assets" in the energy sector. Energy Shock and Macroeconomic Chain Effect For global investors, it is not only the direct impact on oil companies that is important, but also the indirect effects on the macroeconomy. According to the Federal Reserve Bank of Dallas, a 20% increase in oil prices raises inflation in the United States by 0.3 percentage points. And this is at a time when real incomes of Americans have only just begun to recover, with growth of about 1.9% year-on-year. An additional inflationary blow could negate the positive developments of recent months. The Fed is facing a difficult choice: either to suspend rate cuts or to take the risk of letting inflation pick up again. The European Central Bank has already postponed easing, and the People's Bank of China may have to stimulate domestic demand amid falling foreign demand due to the energy shock. This situation is complicated by the very structure of modern markets. Despite high profits, the energy sector is poorly represented in the major stock indices. At the same time, the technology sector, which dominates the S&amp;P 500 index, has suddenly shown a high sensitivity to changes in the oil market. At its peak, the correlation between microchip stocks and oil shocks reached 120%. This means that any intensification of the energy shock could trigger a large-scale sell-off in the IT segment. If stock indices fall by 200-300 points - which is quite possible if Brent exceeds $100 - this could trigger a wave of forced position closures (margin calls) worth $18 billion to $27 billion. Especially in those segments where leverage is actively used. The instability in the markets is already manifested in sharp fluctuations: for example, WTI futures in June changed by 4-7% in one day. Read also Trump's tariff war will slow the global economy and raise inflation - OECD forecast In February 2025, LNG supplies from Qatar through the Strait of Hormuz reached 1.88 million barrels in oil equivalent. In the event of a blockade, the country will have no alternative routes. Insurance tariffs for transportation are already rising: shipowners are demanding "war" premiums for passing through the Strait of Hormuz, just as they did during the Red Sea crisis in 2022. According to the EIA, in 2024, oil exports through Hormuz brought the country about $67 billion, which is 16.7% of GDP. This factor may deter Tehran from taking radical actions. So could pressure from China and Qatar. On the one hand, they are interested in stability, and on the other hand, they continue to play strategically against the West. Despite all this geopolitical turbulence, oil prices have remained in a wide range, from $65 to $90 per barrel. Any mention of a ceasefire, diplomacy, or even an official visit to the region immediately reduces prices by $5-7. Oil as a Structural Factor of the New Geopolitical Era In 2020-2022, it seemed that the green transition and the growth of the technology sector were reducing the role of hydrocarbons. But the crises of 2022 and 2025 proved otherwise: oil remains a tool of geopolitics, a driver of inflation and a factor in the revaluation of investments.

Oil wars: how the Middle East is reigniting the global appetite for risk

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