Historic Oil Surge: War Disrupts Energy Flows

Global oil prices are on track for their largest monthly rise ever in March, fueled by significant disruptions to energy flows due to ongoing international conflict. Brent crude, the international benchmark, has jumped 59% this month, trading above $115 a barrel. This surge surpasses the previous record set in September 1990. Analysts predict continued elevated prices as long as the conflict persists.

Refined products have seen even more dramatic increases, with jet fuel and diesel roughly doubling since the start of the year. In the US, petrol prices have exceeded $4 a gallon for the first time since the 2022 energy crisis. The current volatility stems from Iran's effective closure of the Strait of Hormuz, a critical shipping channel, which has removed an estimated 300 million barrels from global supply.

This disruption is significantly larger than the impact of the 2022 crisis involving Russian supply. Consequently, approximately 10 million barrels of oil production have been halted in Gulf countries unable to export, and Middle Eastern refining capacity is significantly reduced. Morgan Stanley forecasts Brent crude to average $110 a barrel in the second quarter, cautioning that prices may rise further as demand has not yet been curtailed.