But Iran has responded in kind. The closure of navigation in the Strait of Hormuz — through which nearly one-fifth of the global trade in oil and liquefied natural gas (LNG) passes — transforms a direct military exchange into a global risk event. With traffic halted, shipping capacity has contracted, war-risk insurance premiums have spiked, and energy markets have been adjusting accordingly.
The added strain on Saudi refining capacity affects downstream fuel markets, not just crude supply. Refineries like Ras Tanura are chokepoints in the global fuel chain. When they are threatened or briefly shut, diesel and jet-fuel markets can tighten even if oil production continues unchanged. The impact is immediate and product-specific.
The disruption to Qatari LNG facilities works differently. LNG markets are more flexible than pipelines, but supply remains concentrated. Qatar is set to account for around a quarter of the global LNG market over the next decade, making the market highly sensitive. Already, LNG futures have jumped roughly 50% in intraday trading, signalling an immediate repricing of geopolitical risk even without any physical disruption.
Since the steep drop in Russian pipeline gas deliveries in 2022, Europe has become structurally reliant on seaborne LNG, with Qatar a key long-term supplier. Any sustained disruption to Qatari exports would directly hit European gas balances, as well as those of major Asian importers.
See also: Iran war creates energy crunch for export giant Australia
These examples all underscore the structural fragility of the global energy trade. Even a temporary closure of the Strait of Hormuz is sufficient to raise shipping costs, insurance premiums, and forward contracts, embedding a systemic risk premium in global gas markets.
These developments could draw more regional players directly into the conflict. Saudi Arabia and other Gulf producers face a strategic dilemma: failing to respond to attacks on their energy infrastructure risks further targeting, yet any escalation could widen and prolong the war. The stakes could not be higher, because the region’s energy facilities are far from peripheral. They lie at the heart of national revenue, political stability and geopolitical influence.
True, Iran’s leverage is not unlimited. The Strait of Hormuz is a critical chokepoint, but it is heavily patrolled. Its narrow geography means that even limited missile or drone strikes on commercial vessels can disrupt traffic. Yet the US maintains a substantial naval presence in the Gulf. A prolonged blockade could invite overwhelming retaliation against Iran’s naval forces and coastal infrastructure. In that sense, threats to close the Strait are likely aimed at raising risk premiums rather than signalling a sustainable military strategy. Even if traffic quickly resumes, the episode will have shown how little interference is needed to produce outsized financial effects.
On the macroeconomic front, the global economy is already burdened by high public debt, persistent inflation and uneven growth. A sustained disruption to Gulf exports would push oil and LNG prices sharply higher, with immediate inflationary consequences.
The implications for emerging markets are particularly worrying, as energy often makes up a large share of their import bills. Higher dollar-denominated prices, coupled with currency depreciation, could trigger balance-of-payments pressures and a repricing of sovereign risk. By targeting infrastructure that hits not only its immediate adversaries but also global consumers, Iran seeks to broaden the economic costs of confrontation. The aim is not necessarily to halt global supply, but to create enough instability to force a wider diplomatic or strategic rethink.
This strategy has many historical parallels. The 1973 OPEC oil embargo fundamentally reshaped Western foreign policy; Iran’s previous attacks on Saudi oil facilities in 2019 briefly rattled markets without generating sustained shortages; and Russia’s weaponisation of gas flows prior to 2022 demonstrated how quickly energy interdependence can become a source of geopolitical leverage.
The current crisis shares elements of each of these episodes, but it is unfolding in a more financially integrated and faster-moving global economy. Energy prices will have a bearing on inflation data, central-bank policymaking, and political approval ratings within weeks, if not days. The sheer speed of these ramifications further increases the strategic value of disruption, as well as raising the stakes for regional actors whose own economies depend on stable export revenues.
This escalation does not need a blockade or major supply collapse. Concentrated infrastructure under geopolitical tension spreads stress across markets. Continued attacks on Gulf energy assets would push risk beyond prices, reshaping investment, insurance and diplomatic alignments.
The escalation tests both military deterrence and the resilience of the global energy system. In a connected economy, regional wars rarely stay regional when energy flows are at stake. — © Project Syndicate, 2026
Avri Schechter is Director of the Yannay Institute for Energy Security at the School of Sustainability at Reichman University
