Global oil prices on Monday surged above Sh12,900 per barrel for the first time since 2022 as the Middle East war enters its tenth day.
Leaders warn the prolonged conflict could strain economies worldwide through higher fuel and energy costs. Analysts say the spike may push inflation above targets, while markets brace for further volatility if tensions escalate.
The jump in oil prices reflects growing concerns about energy supply disruptions linked to the war involving Iran, the United States and Israel.
Brent crude, the international benchmark for oil prices, has climbed to a four-year high as traders react to uncertainty surrounding production and transport routes in the region.
Economists warn the surge could translate quickly into higher petrol prices for consumers and increased energy costs for businesses.
The sharp rise in crude prices has also been accompanied by another jump in global gas prices, signalling broader pressure on energy markets.
The development has prompted warnings from political leaders about the economic impact of the prolonged conflict.
UK Prime Minister Keir Starmer cautioned that the longer the war continues, the greater the likelihood of economic repercussions, noting that governments are working to minimise the impact on businesses and households.
In the United States, President Donald Trump acknowledged the increase in energy costs but suggested the short-term rise in prices was a necessary trade-off in the pursuit of stability and security.
The war has already had significant political and geopolitical consequences. Iran has named Mojtaba Khamenei as its new supreme leader following the death of his father, Ayatollah Ali Khamenei, who was reportedly killed nine days earlier during US-Israeli strikes.
The leadership transition has intensified uncertainty inside Iran and across the wider region.
Residents in Tehran describe a growing sense of concern about the country’s future, with some saying prospects for political change appear increasingly unlikely amid the escalating conflict.
The war has also produced direct security incidents in neighbouring countries. In Bahrain, state media reported that 32 people were injured after an Iranian drone strike, reaffirming fears that the conflict could widen across the Gulf region.
Beyond the immediate security implications, economists are closely monitoring how the spike in energy prices may influence inflation worldwide.
Energy costs play a major role in shaping consumer prices, affecting transport, electricity generation and the production of goods.
Analysts say that if current oil prices remain at elevated levels, inflation forecasts in several economies could exceed central bank targets.
Many policymakers had expected inflation to stabilise around the widely used 2% target after years of economic turbulence, but the latest developments threaten to derail those projections.
However, economists say the situation differs from previous crises such as the war in Ukraine, which triggered major increases in global food prices due to Ukraine’s role as a key exporter of wheat and cooking oil.
The current conflict has not yet significantly disrupted food supply chains, which may limit the broader inflationary impact compared with earlier shocks.
Nevertheless, higher fuel prices can still influence inflation indirectly by raising transport costs and shaping expectations among consumers and businesses.
When households anticipate higher prices in the future, workers may demand larger wage increases and companies may adjust pricing strategies, creating longer-term inflationary pressures.
Financial markets are therefore watching developments in the Middle East closely. Energy traders and policymakers alike acknowledge that the situation remains highly fluid, with oil prices likely to remain volatile as the conflict evolves.
If hostilities continue or expand further across the region, analysts warn that energy markets could face additional shocks, potentially pushing oil prices even higher and intensifying economic pressure worldwide.
For now, the surge past the Sh12,900 mark signals how quickly geopolitical conflict can ripple through global markets, affecting everything from petrol stations to national inflation forecasts.