Oil tops $100 as Strait of Hormuz tensions threaten global fuel supply

Global oil prices have surged above $100 per barrel as escalating tensions in the Middle East raise fears of disruption to energy shipments through the Strait of Hormuz — one of the world’s most critical oil and gas transit routes.

International market data show both major crude benchmarks recorded sharp gains on Sunday. Brent crude, the global reference price, rose to about $108.68 per barrel, while West Texas Intermediate (WTI) climbed to roughly $108 per barrel. Compared with trading levels the previous day, Brent prices increased by about 18 per cent and WTI by nearly 20 per cent, reflecting how quickly geopolitical risks are influencing global energy markets.

Energy analysts say the surge is closely tied to growing instability involving Iran and the potential disruption of tanker movements through the Strait of Hormuz. The narrow waterway connecting the Persian Gulf to the Arabian Sea is considered one of the most strategically important corridors in global energy trade.

Every day, roughly one-fifth of the world’s oil and liquefied natural gas shipments move through this route. Major Gulf exporters — including Saudi Arabia, Qatar, Kuwait, Iraq and the United Arab Emirates — rely heavily on the strait to deliver energy supplies to international markets.

The latest surge in prices follows warnings issued by Iran’s Islamic Revolutionary Guard Corps (IRGC) to commercial vessels navigating the strait after conflict erupted between Iran, the United States and Israel on February 28. Shipping crews operating in the region have reportedly received security alerts, and several vessels have already been targeted in attacks.

Market observers say even the possibility of disruptions in the strait can trigger rapid price increases because global energy markets remain highly sensitive to supply risks in the Gulf.

The last time oil prices crossed the $100 threshold was in early 2022 following Russia’s invasion of Ukraine, which caused severe disruptions to global energy markets and triggered widespread inflation in fuel and transport costs.

Beyond oil markets, analysts warn that sustained instability in the Strait of Hormuz could also affect liquefied natural gas supplies to Asia, where many countries rely heavily on imports from Gulf producers.

Qatar, one of the world’s largest LNG exporters, ships most of its cargoes through the strait. Any restriction on shipping traffic could therefore affect gas deliveries to major Asian importers including Japan, India and Bangladesh.

For Bangladesh, the risk is particularly significant. The country has increasingly depended on LNG imports to compensate for declining domestic gas production. Since entering the LNG market in 2018, Bangladesh has relied on floating storage and regasification units (FSRUs) to receive imported cargoes and supply gas to its national grid.

If tanker movements through the Strait of Hormuz are delayed or restricted, LNG shipments from the Gulf could take longer to arrive or become more expensive. Such disruptions could tighten gas supply for electricity generation and industrial production, potentially forcing authorities to increase imports from the volatile spot market or impose stricter energy rationing.

India faces a similar exposure, although its larger and more diversified gas market may allow it to absorb disruptions more easily. However, analysts note that even if physical shortages are avoided, higher shipping costs and insurance premiums could still raise LNG prices for power producers, fertiliser plants and city gas networks.

Japan, one of the world’s largest LNG importers, is also sensitive to developments in the Gulf. Although it sources gas from multiple regions, Middle Eastern cargoes remain a key part of its supply mix. A prolonged Hormuz disruption could force Asian buyers to compete more aggressively for LNG from alternative suppliers such as the United States and Australia, potentially pushing spot prices higher across the region.

Energy traders and shipping companies are already monitoring tanker movements in the Gulf closely, aware that instability around the Strait of Hormuz can quickly ripple across global energy markets.

In the short term, the most immediate impact may come in the form of higher freight costs, increased insurance premiums and delayed shipments rather than a complete halt in exports. However, analysts warn that if tensions escalate further, the consequences could extend far beyond oil markets.

Higher energy prices could influence inflation, electricity costs and industrial production across energy-importing economies, particularly in Asia where demand for oil and gas remains strong.

Impact on South Asian power prices and fuel subsidies

For South Asian economies, sustained high oil prices could create significant pressure on electricity tariffs and government fuel subsidies. Countries such as Bangladesh, Pakistan and India rely heavily on imported fuels for power generation, making them vulnerable to global price shocks.

In Bangladesh, natural gas remains the backbone of electricity production, but declining domestic reserves have pushed the country to rely more on imported LNG and liquid fuels. If crude oil prices remain above $100 per barrel, the cost of fuel-based electricity generation — particularly from diesel and furnace oil plants — could rise sharply.

Higher fuel costs would increase the financial burden on state-owned utilities and may require larger government subsidies to keep electricity tariffs stable for households and industries. Bangladesh has already faced similar pressures during previous global energy price spikes, when authorities had to adjust electricity and fuel prices to reduce subsidy costs.

LNG imports could also become significantly more expensive. When global oil prices rise, LNG prices often follow, particularly in the spot market, where Bangladesh frequently purchases additional cargoes to manage gas shortages. This could increase the country’s energy import bill and place additional strain on foreign exchange reserves.

India may be somewhat better positioned due to its diversified energy mix and larger domestic market. However, higher LNG prices could still affect fertiliser production, city gas distribution and gas-fired power generation. Increased energy costs could ultimately filter through to consumer prices and industrial output.

For policymakers across South Asia, the renewed surge in oil prices underscores the importance of energy diversification, strategic reserves and long-term supply contracts. Analysts say expanding renewable energy capacity and strengthening regional power trade could help reduce exposure to future fuel price shocks.

As geopolitical tensions continue in the Gulf, governments in energy-importing countries will be watching global oil and gas markets closely — aware that disruptions in the Strait of Hormuz could quickly translate into higher costs for electricity, industry and everyday consumers.