Dubai: As tensions intensify between Israel and Iran—now drawing direct involvement from the United States—economists warn that global consumers could soon feel the financial fallout. From grocery bills to fuel prices and utility costs, everyday essentials may become more expensive in the weeks ahead.
While a surge in prices is not guaranteed, the risk is clearly rising, particularly for nations in Asia and the Middle East that are heavily reliant on global oil flows.
Why Oil Is Central to the Concern
Oil isn’t just about fueling cars and planes. It’s deeply embedded in the production, packaging, and transportation of nearly every product we consume—food, clothing, electronics, pharmaceuticals, and more.
A spike in oil prices pushes up transportation and manufacturing costs, which are eventually passed on to consumers. One key chokepoint now under scrutiny is the Strait of Hormuz, through which nearly 20% of the world’s oil supply flows. Iran has threatened to restrict movement through the waterway, and if it acts on that, energy analysts warn of an immediate supply shock.
What If Oil Hits $100 Again?
Oil prices are already climbing, and analysts say a blockade or full-scale military escalation could push crude oil well above $100 per barrel.
According to ABN AMRO Economics Bureau, a Brent crude increase to $90 could raise global inflation by 0.4 to 0.5 percentage points, while a surge to $140 could push it up by 1.3 points.
While global economies are more resilient than in past decades, such a shock would inevitably raise fuel prices, transport costs, and inflation expectations.
How It Could Affect the UAE and Asia
In countries like the UAE, where price controls limit domestic inflation, the impact would still be felt through imported goods and travel-related expenses. In a highly trade-dependent economy, even a modest increase in global freight or logistics costs can raise the price of consumer staples.
Meanwhile, countries such as India, Indonesia, and others in Southeast Asia that rely on imported fuel face heightened risk from both delays and cost spikes in shipping, leading to higher retail prices across essential goods.
Broader Economic Impact
Persistently high oil prices may also delay expected interest rate cuts by major central banks such as the U.S. Federal Reserve and the European Central Bank, increasing the cost of borrowing and potentially stalling investment.
Saxo Bank analysts note, “This could keep borrowing costs elevated for longer and increase prices on capital-intensive goods like electronics, housing, and cars.”
GCC and Global Inflation Risks
Unlike past oil price spikes tied to regional militias or local tensions, the current conflict involves direct military strikes between sovereign states—with Iran controlling a vital global energy corridor.
Even without an actual shutdown of the Strait of Hormuz, the threat alone is enough to unsettle oil markets and trigger a price surge.
Central Banks May Reconsider Rate Cuts
Just weeks ago, financial markets were hopeful for interest rate reductions. But the oil shock is now reshaping that outlook.
ABN AMRO analysts predict that the U.S. Federal Reserve could delay rate cuts until Q2 2026, citing inflationary pressures and a still-resilient labor market. In Europe, a similar scenario is playing out. If oil hits $140, temporary rate hikes by the European Central Bank may even be on the table.
Key Signals to Watch
- Strait of Hormuz: Any disruption could spike oil prices by $10 or more overnight.
- Retaliation: Attacks on oil facilities could further escalate the crisis.
- Central bank moves: Rising oil prices could force monetary tightening.
- Supply chain disruptions: Particularly in Asia, where reliance on Gulf oil is highest.
Final Word: A Second Wave of Inflation?
Oil remains the lifeblood of the global economy. Even short-term spikes can ripple across industries, affecting household budgets around the world. While markets could stabilize if the conflict eases, the risks are real—and growing.
Whether at the fuel pump, grocery store, or in electricity bills, consumers may soon see signs of pressure from this unfolding geopolitical crisis.
