Whalesbook
The escalating US-Iran conflict is now directly challenging global market stability, using vital trade routes as a weapon and revealing the deep weaknesses in modern supply chains. Axis Bank chief economist Neelkanth Mishra highlighted how closely financial markets are tied to this geopolitical tension, suggesting Iran could be using market pressure strategically. The Reserve Bank of India's April bulletin shares these concerns, forecasting major difficulties for India's economy, including higher energy and input costs, and disrupted trade flows, with added pressure from financial markets.
Oil Prices Surge on Hormuz Blockade
The prolonged closure of the Strait of Hormuz, which handles about 20% of global oil supply, has caused a severe supply shock. Brent crude oil prices, previously trading between $60-$70 a barrel earlier in 2026, have now jumped past $100 and are nearing $120, showing increased risks. As of April 24, 2026, Brent crude was trading near $105.05. This price jump reflects not only physical supply issues but also the significant impact of geopolitical risk premiums that traders build in, expecting extended disruptions. Past events, like the 1970s energy crisis or the 2022 Russia-Ukraine war, show how dramatic price swings can result from such chokepoint blockades, with previous closures sending Brent to highs of $119-$150 a barrel. The current situation is considered the largest disruption to world energy supply since the 1970s energy crisis.
India Faces High Energy Costs
For India, which relies heavily on imported energy, this crisis is a major national security concern. The country imports nearly 85% of its crude oil, and before the current conflict, a large part of these imports passed through the Strait of Hormuz. Although India has worked to diversify its import sources, its core dependence on external energy remains a significant vulnerability. The current conflict is increasing import costs, straining government finances, and worsening inflation. The impact goes beyond oil, with fertilizer exports—a third of which use the Strait—also facing disruption, threatening food security.
Global Supply Chains Under Strain
Global supply chains are experiencing extreme pressure. The Global Supply Chain Pressure Index rose to 0.68 in March 2026, marking a three-year high. This rise is due to a combination of soaring transportation costs, material shortages, and factories increasing stockpiles as a response to shipping disruptions and energy price shocks. Energy-importing economies in Asia and Europe are especially vulnerable to higher freight and insurance costs. The conflict is also affecting air freight capacity and prices, impacting various trade routes.
Long-Term Price Risks Emerge
The closure of the Strait of Hormuz highlights more than just a temporary supply shock; it reveals a deeper, structural weakness in global trade. Iran's strategy of using market pressure as leverage shows its readiness to exploit global interdependencies. This geopolitical division, along with changing trade rules, is leading to continuous, structural supply chain uncertainty, requiring companies to adapt their operations rather than focus solely on efficiency. If the conflict continues, sustained high energy prices are likely. Prices could remain around $100 a barrel through 2026 and 2027, or potentially reach $180-$200 in a prolonged closure scenario. This situation not only risks fueling inflation but also slowing global trade growth, which was already expected to slow.
Outlook: Volatility Expected
Analysts expect oil prices to stay high. The U.S. Energy Information Administration forecasts Brent crude oil to average $76 a barrel in 2027, which is about $23 a barrel higher than earlier predictions. While the market has seen some price stabilization as diplomatic efforts show signs of hope, the ongoing risk of renewed escalation means volatility will likely continue. For countries that import energy and for global trade, the key is managing this persistent uncertainty. Long-term strategies will involve reducing demand and diversifying supply sources.