Oil: The Role of the Commodity in the Global Economy Amid Instability
Recent conflicts and instability reinforce the world's dependence on oil and its effects on markets and economic activity
Maria Eduarda Ikeda (Junior at GNPoli)
Oil is a fossil, non-renewable natural resource that plays a central role in the global economy and in world politics. Used mainly as an energy source and as an industrial raw material, it underpins products such as gasoline, diesel and plastics, and is essential to the functioning of sectors such as transportation, logistics and manufacturing. This broad dependence gives oil great geopolitical relevance, directly shaping relations between producing and consuming countries. Against this backdrop, recent events, especially conflicts in strategic production and export regions, have been affecting the market, causing price swings and highlighting the role of oil in the dynamics of the world economy.
In this context, the recent oil market landscape has been heavily influenced by the escalation of the conflict in the Middle East, particularly involving Iran, the United States and their allies. The war, which began in early 2026 after coordinated strikes on Iranian facilities, quickly spread across the region, hitting military bases, trade routes and strategic energy infrastructure. As a direct consequence, there was a severe disruption in the global flow of oil, including restrictions on maritime transport at critical chokepoints such as the Strait of Hormuz. As a result, global oil supply has already fallen significantly, with more than 500 million barrels of crude oil and condensate taken off the market since the war began.
In this supply-constrained scenario, the Strait of Hormuz stands out as one of the world's largest logistical bottlenecks. This sea route, which connects the Persian Gulf to the main global markets, carries roughly one fifth of all the oil consumed on the planet each day. At its narrowest point, the channel is 33 kilometers wide and runs through areas under Iran's direct influence, which makes it particularly sensitive in times of tension. As the conflict intensified, restrictions and threats to navigation in the region began to compromise the flow of oil, preventing millions of barrels from reaching the international market every day. As a result, the Strait of Hormuz proved to be a critical point for global energy security, amplifying the impact of the war on oil supply and prices.
Given this scenario, oil prices began to fluctuate in line with the evolution of the conflict and market expectations regarding global supply. In moments of heightened tension, prices hit higher peaks, with Brent crude surpassing US$100 per barrel for the first time in more than three and a half years, while periods of relief led to pullbacks. This behavior shows how quickly the market reacts to uncertainty, especially when supply is already under pressure.
Brent Price Evolution (US$/barrel) in 2026 (Source: Investing.com)
The impacts of these dynamics go beyond the energy sector and are already reflected in projections for the global economy. In its World Economic Outlook released in April, the International Monetary Fund (IMF) revised its 2026 global growth estimate downward, from 3.3% to 3.1%, noting that the conflict interrupted a path toward greater stability. In more adverse scenarios, with the war continuing and new energy price shocks, growth could fall to around 2.5%, or even close to 2% in extreme situations, a level historically associated with global recessions. In addition, higher energy prices tend to push up inflation, tighten financial conditions and increase risk aversion in the markets, amplifying the negative effects on global economic activity.
The effects of this scenario are particularly intense in highly energy-dependent sectors, such as aviation, transportation and fuel-intensive industries. Airlines have been hit hard, with jet fuel prices doubling in just a few weeks, jumping from around US$99 to as much as US$209 per barrel, squeezing one of the sector's main operating costs. Since fuel can account for up to a quarter of airlines' expenses, this increase has led companies to raise fares, cut flights and revise their financial guidance, exposing margin erosion and the sector's fragility in the face of energy shocks. This scenario has also been reflected in the financial markets, with airline stocks performing poorly over the period: American Airlines shares are down about -25% year to date, while United Airlines and JetBlue have fallen approximately -21% and -22%, respectively, weighed down by rising operating costs.
Beyond aviation, global transportation and logistics are also heavily affected. More expensive diesel and disruptions on strategic routes raise the cost of sea and land freight, while delays and operational restrictions hinder the flow of goods. This effect spreads to energy-intensive industries, which face higher production costs and shrinking margins, often passing these costs on to end consumers. Consequently, there is a chain reaction that contributes to an economic slowdown, with companies operating at lower profitability and consumers facing higher prices across several sectors.
On the other hand, the rise in oil prices has directly benefited companies in the energy sector, especially oil companies, which have been posting strong results. As the commodity appreciates, these companies are able to grow their revenues without a proportional increase in production costs, which translates into high profits. Since the start of the war, the world's 100 largest oil and gas companies have earned about US$30 million in extra profit per hour. If this scenario persists, these companies are estimated to accumulate up to US$234 billion in additional profits over the course of 2026. This performance has also been reflected in the financial markets: energy stocks have rallied strongly, outperforming other segments of the stock market amid global instability. Companies such as Shell are up about +17% year to date, while Valero Energy has gained close to +45% and Marathon Petroleum has also posted significant gains over the period, reflecting higher oil prices and improved earnings expectations. This movement reinforces the cyclical nature of the sector, in which periods of geopolitical tension and supply constraints tend to generate significant gains for oil producers.
The outlook for the oil market remains uncertain and depends directly on how the conflict in the Middle East unfolds. If the situation stabilizes, prices could retreat and ease pressure on the global economy. On the other hand, an escalation of tensions could trigger new price spikes and prolong the inflationary impact. Moreover, recent volatility reinforces an important structural shift and suggests that crises of this kind tend to accelerate investment in renewable energy, seen as a way to reduce dependence on unstable regions and increase energy security.
This scenario shows that oil remains a central variable in the functioning of the global economy. Heavy dependence on this resource means that any instability, especially in strategic regions, has almost immediate effects on prices, markets and economic activity. This became even more evident in recent months, with geopolitical conflicts directly influencing global supply, costs and expectations. Even as the energy transition advances, oil still plays a dominant role, and everything indicates that it will remain one of the main drivers of global economic balance in the years ahead.
