The way the Iran-US war unfolded and caused damage to oil assets in the Middle East, it is clear that even if Iran and the United States announce and implement a permanent ceasefire immediately, the global oil market will not recover for months. For natural gas, the disruption is measured in years, not months. This is not pessimism. This is what the data silently speaks.
The conflict has done something that no geopolitical shock since the 1973 Arab oil embargo has managed to do. It has simultaneously disrupted production, transit, and insurance across the same chokepoint. Brent crude, which was trading near $70 per barrel before hostilities began on February 28, 2026, crossed $113 per barrel, a 60% spike in under four weeks. This is not a paper price. Physical oil supply from a region accounting for 20% of global daily output has been interrupted simultaneously at the source, in transit, and at the point of export.
At present, the global energy market is facing not one crisis but two. Most importantly, these two operate on entirely different timescales. On crude oil, the core structural problem is the Strait of Hormuz. This is the world's most critical energy chokepoint, and unlike the Russia-Ukraine disruption of 2022, where Russian oil was rerouted to Asia through alternative logistics, the Strait has no viable workaround at scale.
The natural gas situation is a different and far more difficult problem. Iranian strikes on Qatar's Ras Laffan Industrial City, the world's largest LNG processing hub, have destroyed two of Qatar's fourteen LNG trains and one of its two gas-to-liquids facilities. This wipes out 12.8 million tonnes per year of LNG export capacity, and the repair timeline is three to five years.
History offers a guide, though an imperfect one. After Russia invaded Ukraine in February 2022, WTI crude rose above $100 per barrel by March and did not normalise to pre-war levels until well into 2023, over twelve months later, even as Russian supply was gradually rerouted to Asian markets. The 1990 Gulf War is a faster precedent: prices reversed within roughly two months after the coalition's decisive military success made it clear that supply was safe. But the infrastructure damage in 2026 is categorically more severe than in 1991, and there is no rerouting solution available this time. A minimum of two to four months for crude oil normalisation, assuming a swift and credible ceasefire, is the optimistic scenario. For gas markets, the realistic horizon is 2028 at the earliest.
The second and third-order consequences of the global oil crisis are even more disturbing. The region produces nearly half the world's seaborne sulfuric acid, a primary input for fertiliser manufacturing and copper mining operations across Africa and Asia. A sustained Hormuz disruption not only raises fuel prices in the short term but also the global food production costs six to eighteen months from now, as fertiliser supply chains respond to the sulfur shock. If Brent oil stays at $80 through mid-2026, it would depress global GDP growth in the first half of 2026 by 0.6% on an annualised basis. The actual price has been well above $80 and is expected to remain so for the next few months.
Three things are clear. The IEA's emergency reserve drawdown, already the largest in the agency's 52-year history at 400 million barrels, must be sustained and coordinated, not treated as a one-time announcement. This time, the gap is larger, and the release needs to match it in both scale and duration. Import-dependent economies, particularly across South and Southeast Asia and sub-Saharan Africa, must immediately negotiate long-term LNG supply contracts with non-Gulf producers.
And central banks in import-dependent economies need to be very careful about their policy response. The instinctive reaction to an inflationary oil shock is to raise interest rates. But this is exactly the wrong response when inflation is supply-driven rather than demand-driven, and this is, without doubt, a supply shock. Raising rates will damage growth without reducing fuel prices by a single cent. The right policy response is fiscal, not monetary: targeted subsidies for the most vulnerable consumers, strategic reserve deployment, and accelerated investment in domestic energy alternatives. The RBI's experience with food inflation, where hawkish monetary policy repeatedly failed to tame a supply-side problem, is directly applicable to how every central bank in an oil-importing economy should be thinking right now.
The global economy is at an inflection point. This conflict has exposed, in the most painful way possible, just how structurally dependent the world remains on a single narrow waterway for its energy security. That is a vulnerability which took decades to build and will take years to unwind. The ceasefire, when it comes, will be a necessary first step. But the world economy's recovery from this shock, measured in stable prices, restored supply chains, and rebuilt confidence in Gulf energy infrastructure, will be a much longer journey.
Rajeev Upadhyay
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