Before the Middle East war, 40 tankers carrying 20 million barrels of crude oil and petroleum refining products crossed the Straits of Hormuz every day. Now few are tankers can pass through the Straits of Hormuz.
Energy prices are projected to rise by 24% this year, at their highest level since Russia's invasion of Ukraine in 2022, as the Middle East war causes serious shock to world commodity markets, according to the World Bank Group's latest report on Market Prospects.
What countries will suffer the most from oil shock?
The Middle East war will cause the biggest increase in energy prices for four years.
Total commodity prices are projected to increase by 16% in 2026, due to the launch of energy and fertilizer prices and record prices for many basic metals.
The shock will have a serious impact on job creation and growth, according to the analysis of theThe World Bank.
The attacks on energy infrastructure and disturbances in shipping in the Straits of Ormuz, which manages about 35% of the world's crude oil trade through the sea, have caused the greatest shock to the oil supply ever recorded, with an initial reduction in global oil supply by about 10 million barrels a day.
Even after the mitigation since their recent peak, Brent oil prices remained more than 50% higher in mid-April than they were at the beginning of the year.
The average price of Brent oil is projected to reach $86 a barrel in 2026, from $69 a barrel in 2025. These predictions assume that the most intense disturbances will end in May and that shipping through the Strait of Ormuz will gradually return to pre-war levels by the end of 2026.
According to the report, an increase in oil price by 10% caused by a geopolitical supply shock leads to increases in gas prices reaching a maximum of about 7% and increases in fertilisers prices reaching a maximum of more than 5%.
These peaks usually occur about a year after the initial shock of oil prices, with negative consequences for food security and poverty reduction.
US will suffer more from oil shock than China, Russia or EU
President Trump and members of his government have repeatedly claimed that the huge United States oil production protects the country from the tariff crises resulting from Iran's closure of the Strait of Hormuz.
«It is not clear whether they act as fools or as crooks – but in any case, they are wrong», according to analysis of responsivestatecraft.org.
Oil production in the US does not make American consumers immune to oil price fluctuations, which are determined by supply and demand interaction in a global market
On the contrary, because the US economy burns more oil to produce each unit of economic production than the peer countries, the United States will suffer more from the shock of war prices in Iran than China, Russia or the European Union.
These events will surprise many Americans, because the myths and misconceptions about oil have long clouded the US political discussions.
Oil price crises affect all countries, regardless of the amount of oil they produce, due to the deeply globalised nature of oil markets.
Economists often compare the global oil market with a giant bathtub with many taps and drains. The taps represent all countries that produce commercial quantities of oil and the drains represent the states that consume oil, that is, every country in the world.
Generally, it does not matter how much of which taps go into which drains. What determines prices is the overall oil level in the bathtub, which represents global oil supply, and market speculation or forecast for future oil prices that can affect real prices through self-fulfilling prophecies.
Less than 10 million barrels a day
Normally, the world market supplies about 100 million barrels a day, but the closure of Hormuz caused by President Trump's devastating war against Iran has abruptly removed about 10 million barrels a day. This has reduced the level of oil and has increased prices for each country associated with the global oil market – including the US – regardless of whether they directly consume Persian Gulf oil.
The crisis is unfolding with a time delay, with Asia affected first — But no worse. — because of its proximity to the Persian Gulf, the place of natural disturbance. The worst effects have not yet been affected throughout the bathtub, but their arrival is imminent in the Western Hemisphere.
Ironically, the flow of empty oil tankers crossing the Atlantic to load American oil, for which President Trump boasted at Truth Social on April 11, is the exact transmission mechanism through which the shock spreads.
These tankers are now diverting the US supply to Asia, where prices are higher, which in turn leads to rising oil prices here. Energy Information Service (EIA) data for the week ending April 24 indicate a huge fall of 6.2 million barrels from U.S. oil reserves, confirming that diversion is already underway.
EIA now estimates that average petrol prices in the US increased to $4.24 per gallon in April, from $3.77/galon in March and $3.03/gallon in February, before the war began.
Even if the Straits of Hormuz reopen with full capacity tomorrow, gas prices in the US in May will undoubtedly be even higher than in April, due to the time-delayed effects of Persian Gulf oil already withdrawn from the market.
...a global economic collapse
It is no exaggeration to say that the result could be a global economic collapse. Oil crises are associated with economic recessions, with 10 out of 12 recessions in the US after World War II immediately ahead of a sharp increase in oil prices. The only exceptions are the 1960–61 recession and the Covid pandemic.
Oil consumption is a necessity that cannot be reduced quickly
Consumers in the United States live where they live, drive the car they drive and need to move to work. Thus, high petrol prices force U.S. households to reduce costs for everything else, leading to huge demand shock for all other goods. Increased transport costs for species such as food and clothing will also cause a sharp increase in prices of these species of emergency, aggravating inflation in the USA.
This is the basic logic of how oil price crises affect consumers, but the real pain that Americans will feel will be comparatively worse than the situation in China, Russia and the EU.
The US economy is particularly oily, which means it burns more oil for the production of each unit of GDP than all these countries, and in several significant quantities. Per dollar of economic production, the US economy consumes twice as much oil as the EU, 40% more oil than China and 20% more oil than Russia – which is particularly amazing because Russia is an oil state.
Time is not on Trump's side
Two key factors explain why US production depends so much on oil.
Firstly, the US is a culture that loves cars and their transport system has always relied more on cars than other major powers.
Secondly, the US has delayed the transition to electric vehicles , which can be powered by electrical networks that are almost entirely independent of oil .
China, in particular, has long been promoting electric vehicles and electric railways for strategic reasons, understanding the benefits of security from disconnecting its transport system from a global oil market prone to price crises.
In the long term, the U.S. should copy China's strategy and reduce the risk of oil through government policies to encourage the U.S. transition from cars burning oil.
But in the short term, the only solution is to make an agreement with Iran to open the Strait of Hormuz — And the sooner the better.
As the turmoil hits and prices in the US are being launched, Trump's negotiating power over Iran will fall down.
Whatever cost the US has to pay Iran to reopen the Straits of Hormuz, it will only grow as the oil crisis deteriorates. Time is not on Trump's side.
