Oil Prices Spike 35% in a Week

The recent surge in oil prices is a direct consequence of escalating military action in the Middle East, including U.S. and Israeli strikes on Iran that began on February 28, 2026. This has led to retaliatory attacks by Iran and a near-complete halt of shipping through the Strait of Hormuz, a critical chokepoint for global energy supplies. Roughly 20% of the world's oil supply passes through the Strait of Hormuz, and the disruption has had an immediate and significant impact on global markets. Qatar's Energy Minister, Saad al-Kaabi, has warned that Gulf exporters could halt production entirely if their tankers are unable to transit the strait. Major shipping lines like Maersk have already suspended all vessel crossings in the area. In response to the crisis, the U.S. government has announced a $20 billion reinsurance facility to encourage commercial shipping to resume in the region. The plan, managed by the U.S. International Development Finance Corporation (DFC), will cover war risk for vessels, initially focusing on hull, machinery, and cargo insurance. This isn't just an oil story; the halt in shipping has also frozen liquefied natural gas (LNG) exports from Qatar, putting a strain on global gas markets. The ripple effects are being felt across various sectors, with Asian naphtha markets experiencing heightened volatility due to crude oil shortages and reduced refinery operations. The spike in energy prices is fueling concerns about a return to stagflation, a combination of high inflation and stagnant economic growth. Some economists, however, argue that the high prices will eventually lead to a "cost-squeeze," where consumer spending pulls back, ultimately causing prices to fall. For now, the uncertainty has led to a strengthening of the U.S. dollar as investors seek financial safety.