Middle East tensions and global oil market shocks: How does geopolitics affect the energy lifeline?

In mid-2025, as the hostile relationship between Israel and Iran becomes increasingly tense, the situation in the Middle East heats up again, triggering a new round of shocks in the global oil market. From the maritime conflict in the Red Sea to the political turmoil in Iran, the market is always on edge. As the core area of ​​global crude oil supply, every change in the situation in the Middle East may set off a "butterfly effect" in the global energy market.

Why do geopolitics matter?

The Middle East holds nearly one-third of the world's oil reserves, and countries such as Saudi Arabia, Iran, and Iraq in particular play an "anchor" role in international oil prices. Once a country's oil production or exports are interrupted, international crude oil prices will react quickly. For example, just the news that Iran might block the Strait of Hormuz caused the price of Brent crude oil to rise by more than 5% within a few hours.

The uncertainty under the shadow of war is also the most unbearable part of the market. Investors are more inclined to "risk aversion", resulting in sharp fluctuations in oil futures prices, and even affecting the stock market, currency exchange rate and gold market.

Impact of the latest situation on the oil market

Several key factors have driven oil prices higher in recent weeks:

• Israel's air strikes on key Iranian military targets : This not only triggered global public attention, but also made investors worry that the conflict would spread to the key oil transportation area in the Persian Gulf.

• The United States has increased its military deployment in the Middle East : Although it appears to be for "maintaining stability", it actually increases the risk of regional confrontation.

• Iran’s domestic situation is unstable : Political uncertainty has weakened the country’s ability to export oil stably.

• Yemeni Houthi attacks on oil tankers : Heightened security threats in the Red Sea region have caused shipping costs and insurance premiums to soar.

According to energy analysis firm Rystad Energy, if the Strait of Hormuz is really interrupted for more than a week, global oil prices could instantly soar to more than $150 a barrel.

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Who are the beneficiaries and who are the victims?

Beneficiaries:

• Oil-producing governments : Rising oil prices are beneficial to fiscal revenue, especially for US shale oil companies and the Gulf countries.

• New energy companies : High oil prices make alternatives such as wind power, photovoltaics and hydrogen energy more attractive.

victim:

• Oil importing countries : such as Europe, Japan, India and other countries will face the double squeeze of inflationary pressure and economic slowdown.

• Global consumers : High oil prices will be directly reflected in transportation, manufacturing and daily life costs, and even aggravate inflation.

Subsequent trends and market outlook

Although oil prices have recently risen strongly, whether it will continue to rise depends on the following key variables:

• Will the situation in the Middle East escalate further into a full-scale war?

• Will major powers such as the United States and China intervene to mediate?

• Will OPEC+ increase production to balance the market?

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In the long run, the global energy landscape is in a period of transition. Although the strategic importance of the Middle East cannot be ignored, the trend of energy diversification has gradually reduced dependence on a single region. The current oil market shock has once again sounded the alarm for energy security for all countries.

Conclusion:

Every gunshot in the Middle East may affect the global oil price, reminding us that geopolitics is not just news on the map, but an invisible force influencing our lives. In today's world where uncertainty has become the norm, understanding this connection is a must for everyone who pays attention to global market dynamics.