Global financial markets trembled on Friday following Israel’s military strikes on Iran and Tehran’s vow to retaliate, triggering renewed fears of geopolitical instability and a sharp spike in energy prices.
Oil markets responded swiftly, with Brent crude — the global benchmark — surging more than 10% in early trading before settling around $75 per barrel by mid-afternoon. The sharp rise marked a 7% increase for the day and reignited concerns of a broader economic ripple effect, particularly for consumers.
The sudden surge in oil prices has raised the prospect of another wave of inflation, echoing the economic fallout seen three years ago when Russia invaded Ukraine. That conflict sent global energy prices soaring, pushing up the cost of fuel, food, and other essentials, and left economies around the world grappling with a prolonged cost-of-living crisis.
Although Friday’s oil price rally is significant, it remains below the highs recorded in 2022, when Brent crude briefly touched nearly $130 a barrel. Prices today also remain about 10% lower than this time last year.
Still, the immediate concern is whether the current tensions in the Middle East could lead to sustained disruption of oil supplies. Should that happen, consumers may begin to feel the impact beyond just petrol stations.
“When oil prices spike, the first place most people notice it is at the pump,” said David Oxley, senior economist at Capital Economics. “A rough rule of thumb is that a $10 increase in crude oil typically adds about 7p to the cost of a litre of petrol.”
But the consequences go far beyond fuel. Energy is a major input across the economy — from agriculture to logistics to manufacturing. Rising oil prices can drive up the cost of running farm machinery, transporting goods, and processing and packaging food, all of which can filter down into higher retail prices.
Gas prices also rose following Thursday night’s military escalation, further compounding the pressure. In the UK and parts of Europe, where gas remains a major energy source for heating and electricity, this could be cause for concern. However, Oxley noted that the impact of rising gas prices is likely to unfold more gradually due to regulatory price caps and market mechanisms.
While the full fallout of the Israel-Iran confrontation is yet to be seen, Friday’s market reaction underlines the fragility of global supply chains and the sensitivity of economic systems to geopolitical shocks. Energy analysts warn that prolonged instability could threaten to undo recent progress in taming inflation, especially if tensions in the oil-rich Middle East persist.
