Tensions between Iran and the US have destabilised global energy markets through disruptions to the Strait of Hormuz, which handles around 20% of the world's traded oil. This critical shipping passage connects the Persian Gulf to international markets and serves major producers like Saudi Arabia, Iraq, Kuwait, the UAE, and Qatar.
When military escalation occurred, traders incorporated geopolitical risk into pricing models, causing crude and gas prices to spike significantly. The disruption affected not only oil markets but also Europe's liquefied natural gas imports and broader electricity supply chains, increasing wholesale volatility and hedging expenses for energy purchasers.
Recent diplomatic developments have provided some relief, with an interim agreement to restore normal Strait operations helping to reduce price pressures. Nevertheless, analysts caution that full market normalisation will require several months, and any negotiation collapse could quickly reverse these gains.
These events underscore how regional geopolitical developments rapidly propagate through global energy systems, making robust risk management and strategic procurement essential for businesses managing energy expenses.