Global oil markets have reached a dangerous new threshold as Brent crude surged to $91.89 per barrel — its highest point in almost a year — driven by the Iran conflict and a rapidly developing storage crisis across the Middle East. Prices have risen by more than 25% since fighting began, recording their most dramatic weekly performance since the early days of the Covid-19 pandemic.
The storage dimension of this crisis is what sets it apart from a typical geopolitical oil shock. When supply chains are disrupted and tankers cannot safely navigate the Strait of Hormuz, oil production does not automatically stop — it continues, but the oil has nowhere to go. Kuwait has already had to cut production at multiple fields because its storage facilities are at capacity. Saudi Arabia and the UAE are expected to face the same problem within three weeks.
This creates a particularly dangerous feedback loop. As storage fills and production cuts are forced, the global supply of oil tightens, pushing prices higher. Higher prices in turn make the economic fallout from the conflict more severe, increasing pressure on governments to find a resolution — while at the same time reducing the financial capacity to do so. Analysts have described the situation as a potential “storage doom loop.”
The LNG market has been equally disrupted. Qatar, which supplies roughly a fifth of the world’s LNG, has suffered drone-strike damage to a key export terminal and has warned that even an immediate end to the conflict would leave it unable to resume full exports for weeks to months. European gas prices have responded by climbing to three-year highs, adding to the inflationary pressures already building from the oil side.
Global financial markets have not been immune to these developments. Asian stocks suffered their worst week since the pandemic, while European and UK indices both fell more than 5%. UK bond yields jumped to their highest levels since the Liz Truss mini-budget era, and the probability of an imminent interest rate cut in Britain fell from 80% to just 15%. Airlines were among the biggest casualties on stock markets, with major carriers warning of hundreds of millions in lost profits.