Two Wars Choke Global Energy Supplies, Driving Oil Prices Higher

Global energy markets are under unprecedented pressure due to escalating conflicts in the Middle East and the Black Sea. Security concerns at strategic maritime chokepoints, including the Strait of Hormuz, the Bab al-Mandeb Strait, and the Black Sea, are collectively imperiling roughly a quarter of the world's oil supply, creating significant vulnerabilities for the global economy. This situation has driven international benchmark Brent crude prices above $100 per barrel, intensifying volatility in energy markets.

Tensions in the Middle East have notably escalated in the Red Sea. Iran-backed Houthi rebels in Yemen have intensified attacks on Saudi oil tankers, threatening maritime traffic through the Bab al-Mandeb Strait. These threats have forced some Saudi oil tankers to reroute. According to The Wall Street Journal, the Red Sea chokepoint, particularly Bab al-Mandeb, had become the largest export route for Saudi Arabia's crude following disruptions in the Strait of Hormuz, accounting for approximately 12% of the world's seaborne oil flows. Data from analytics and vessel tracking company Kpler indicates that traffic in the Strait of Hormuz declined by 31%, while traffic in Bab al-Mandeb dropped by 34%. The United States has stated it will hold Iran directly responsible for further Houthi attacks, while Iran’s Revolutionary Guards reportedly claimed the Strait of Hormuz was closed to tanker traffic without their coordination.

In the Black Sea, Ukraine has intensified its attacks on Russian energy infrastructure and ships. Strikes near Russia's Novorossiysk port, which handles nearly a third of Russia's oil and grain exports, have paused flows through a pipeline delivering Russian and Kazakh oil. The Russian Ministry of Defense has acknowledged that navigation in its Black Sea waters has become dangerous. These attacks are seen as part of Ukraine's efforts to choke off Russia's commodity export flows and bring the Kremlin to the negotiating table.

This global energy stranglehold has had an immediate and significant impact on markets. Brent crude (XBRUSD) surged to $100.69 per barrel on July 23, 2026, reaching its highest level in two months. The rise in oil prices has also led to higher gasoline prices in the U.S., with the national average hitting $4.09 per gallon. Elevated oil prices negatively impacted equity markets, with the S&P 500 (S&P 500) tumbling by 1.2%, the Dow Jones Industrial Average (DJIA) by 1%, and the tech-heavy Nasdaq Composite (IXIC) by 2.2%. However, shares of major oil companies like Shell and BP saw gains due to the upward pressure on energy prices.

These developments further strain the global economy's already fragile structure. The world enters these disruptions with some of the lowest levels of oil reserves in years. The broadening conflict in the Middle East and reduced shipping security in the Black Sea create new pressures on supply chains. Notably, an estimated 4 million barrels per day of oil transiting Bab al-Mandeb would be difficult to reroute if the chokepoint is disrupted. This situation presents a new test for the adaptability of energy-hungry economies.

Analysts and market expectations suggest that current shipping disruptions are “increasingly likely” to continue through the rest of the year. Economists at Oxford Economics forecast oil prices will remain above $85 per barrel for the remainder of the year. Goldman Sachs (NYSE:GS) projects that Brent crude could rally to above $120 a barrel in the fourth quarter if supply disruptions persist. Rising oil prices complicate the Federal Reserve's (Fed) inflation outlook, putting pressure on monetary policy by reducing expectations for rate cuts and even raising the possibility of a rate hike.