The oil shock

THE oil shock is real, with the whole of the Middle East affected, oil and financial markets shaken, consumer prices shooting up, and several economies struggling to deal with the wider rep­ercussions of the war between US-Israel and Iran. The intersection of oil is a defining factor in the ongoing conflict that will reshape global geopolitics and economic partnerships. It is crucial to understand that the ‘oil factor’ remains a primary strategic lever in determining the duration, intensity, impact and the eventual outcomes of this conflict. The most significant link is the Strait of Hormuz. Approximately 20 per cent of the world’s oil and 19pc of its liquefied natural gas pass through this narrow waterway. The closure of vessels and the blockade of the Strait of Hormuz have caused the largest disruption to oil supply in history. While it has heightened global uncertainty and inflationary pressures, the Gulf countries are the hardest hit, with infrastructure damage, insecurity, economic losses and rising political tensions. Most Gulf countries have seen a sharp price hike in basic commodities, as merchants are forced to airlift groceries because 80pc of their food supplies were coming through the Strait of Hormuz. The world has also understood that an attack on Iran cannot remain isolated and has serious global economic consequences. The war has also exposed Asia’s extreme dep­e­ndence on Middle Eastern energy resources (75pc of Gulf exports go to Asia). Countries such as China, Japan, India and Pakistan will have to aggressively revamp their energy mix by increasing the share of nuclear, coal and renewable ene­rgy options. While Pakistan attempted to mediate a ceasefire, the subsequent collapse of those talks led to a renewed ‘risk premium’ in oil prices. At the end of the day, it is ordinary consumers who are paying a huge price for the impact of war. Pakistan has witnessed a historic increase in fuel prices during the past three months. As of May 9, 2026, Pakista