Coface, with escalation in the Middle East risks well beyond energy shock

The military escalation between the US, Israel and Iran is putting energy markets under severe strain. The risks related to the Strait of Hormuz - a crucial hub for energy flows - could turn into a threat to the global economy if the conflict continues. "A conflict limited to a few days or weeks should have little impact. However, if the conflict were to continue, the macroeconomic consequences could be significant and go beyond the issue of energy prices, points out Ruben Nizard, Head of Sector Research, Coface. "In the event of a prolonged disruption, Brent crude could reach as high as $147 per barrel," following Monday's 9 March flare-up near $120 with rises of up to around 30%. The rise was due "mainly to the higher 'premium' for geopolitical risk, rather than immediate and concrete supply disruptions," the expert notes. Prior to the escalation, the oil market was largely in surplus with abundant supply, supported by non-Opec+ producers and the rapid replenishment of stocks. This kept prices under pressure (averaging USD 68 per barrel in 2025), but the conflict changed the scenario, reintroducing extreme uncertainty about security of supply.

The main risk is concentrated in the Strait of Hormuz, through which approximately 20% of the world's consumed oil and almost 30% of maritime crude oil shipments pass. "The ability to bypass the Strait is limited and not sufficient to absorb a major shock" highlight Coface's experts, explaining that prolonged or repeated disruptions could conceivably push Brent into triple-digit territory, with the possibility of exceeding the February 2022 peak ($122/barrel) or even the 2008 record ($147/barrel).

An extreme scenario with oil prices permanently above USD 100 per barrel would trigger a new acceleration of global inflation and probably force central banks to reverse course from monetary easing to generalised tightening. A prolonged $15 increase in Brent crude could reduce global growth by about 0.2 percentage points and add almost 0.5 percentage points to inflation. In this context, the risk of stagflation - the combination of weak growth and high inflation - would again become a real threat to the world economy, with serious consequences for businesses and international trade.

"What we are observing is not just an oil price problem but an alarm signal for anyone operating in international supply chains," commented Ernesto De Martinis, Coface's Mediterranean & Africa Region CEO. "Rising logistics and shipping costs, longer delivery times: for companies this translates into immediate pressure on margins and working capital. Added to this is an increasing difficulty in planning purchases and contracts in a context of volatile prices," underlined De Martinis. "If the crisis were to prolong, the risk goes beyond the inflationary aspect: it could deteriorate the ability of trading counterparties to honour their commitments on time, with direct repercussions on liquidity and the regularity of payments along the entire value chain. This is why we will continue to monitor the evolution of the situation with great care, updating our risk assessments to offer companies the necessary tools to navigate this phase of uncertainty."

The implications go far beyond the oil market alone. The Strait of Hormuz is also crucial for the transport of liquefied natural gas (LNG), fertilisers, industrial metals (aluminium) and petrochemicals. In addition, other strategic hubs, such as Bab el-Mandeb or the Suez Canal, could be affected in the event of further regional escalation, resulting in higher transport costs and insurance premiums for shipments. This progressive disruption of supply chains increases the risk of shortages and inflationary pressures, especially for those economies most dependent on energy imports.