Oil has a cruel way of disciplining fantasy

Oil is simply doing what oil does when politicians decide geography is optional. It is rising first, asking questions later, and forcing everyone else to live with the answers. A fortnight into the US-Israeli war on Iran, the real story is no longer confined to missiles, mines and maritime choke points. It is the widening political and economic liability now being exported across the world through energy markets.

Around a fifth of global oil supply normally moves through the Strait of Hormuz, and – as everyone is suddenly finding out – even a partial disruption there would amount to a supply shock larger than the oil crises of 1973 and 1979.

That matters because oil is not merely another commodity. It is still the price that leaks into every other price. Crude feeds petrol and diesel, but also fertiliser, petrochemicals, plastics, freight, aviation and a long list of everyday costs people only notice when their governments start falling in opinion polls. Updates from the energy market make this point even more sharply: diesel, not crude, may be the more dangerous pressure point because it underpins freight, agriculture, mining and industrial activity, with analysts estimating 3-4 million barrels per day of diesel supply could be at risk if Hormuz disruption persists.

So, what exactly has Donald Trump achieved? He may yet discover that bombing Iran has produced the one thing politicians who run on “affordability” should fear most: a self-inflicted energy tax on allies, trading partners and voters. In the United States, rising fuel costs are already colliding with the administration’s political message, while abroad the pain is arguably worse. Europe faces another imported-energy shock while still living with the after-effects of the last one. Asian importers, especially Japan and South Korea, remain exposed to Gulf energy flows. European and East Asian allies are being pushed into an impossible choice: join a war many view as contrary to international law, or pay the price of keeping their distance while oil remains trapped behind Hormuz.

That is why the latest policy theatre around emergency stockpile releases has not reassured markets. A record IEA intervention sounds muscular on paper; in practice, though, it looks more like a photograph of policymakers “doing something.” Oil rebounded even after reports of the largest-ever coordinated action, because traders doubted it could offset the scale of the supply shock. Goldman Sachs estimated such a move would cover only about 12 days of a 15.4 million barrel-per-day Gulf export disruption. Strategic reserves can buy time; they cannot manufacture a functioning Strait.

And then comes the awkward political layer. Trump has demanded allies help reopen Hormuz, but France has ruled out participating in military operations while other allies have also resisted being dragged into the conflict. That leaves Washington in a strange position. The White House wants the strategic benefits of unilateral action and the logistical benefits of multilateral rescue. It would be an impressive model, if only allies were foolish enough to underwrite it.

Markets, to their credit, are less sentimental. They are asking a more practical question: how long does the disruption last? That is the variable that matters. If the conflict ends quickly and shipping normalises, the oil spike can still fade into another ugly but temporary shock. If it lingers, the consequences broaden. Market analysts point out, naturally, that prolonged high prices will eventually hammer the demand curve, just as earlier oil crises accelerated efficiency gains and shifts to alternatives. This time, the adjustment could be even faster because solar, batteries, heat pumps and EVs are no longer futuristic talking points; they are increasingly price-competitive substitutes. High fossil-fuel prices do not only punish consumers. They also subsidise the competition.

That raises another irony. Trump’s war may end up strengthening some of the very transitions his politics often resists. High oil and gas prices make electrification, efficiency and renewable deployment more attractive, especially in poorer and import-dependent economies. That is the reason international news outlets are pointing to Pakistan’s rapid solar deployment and the wider tendency of developing countries to leap toward cheaper alternatives when fossil-fuel insecurity becomes intolerable. If this crisis persists, Washington may discover that using oil as an instrument of coercive power is also a fine way to speed up demand destruction.

Meanwhile, central banks are being handed yet another poisoned chalice. Short-term inflation expectations have jumped on the back of the oil shock, even if long-term inflation expectations remain more contained. That is hardly comforting. Policymakers were hoping to spend 2026 discussing when to ease further. Instead they are being dragged back into the old argument about energy, inflation persistence and policy credibility. Not every spike becomes a 1970s rerun, but oil has a gift for reminding economists that “transitory” is sometimes just the name given to a problem before it gets worse.

The broader point is hard to miss. This war is becoming a liability well beyond Washington. It strains alliances, complicates central-bank paths, pressures budget-stretched governments and raises the political cost of doing nothing. Importers face inflation. Exporters face insecurity. Europe faces higher energy bills and the uncomfortable reality that expensive oil also helps Russia. Japan and South Korea remain vulnerable. India and others must manage the pass-through to domestic prices. The world, in short, is being asked to absorb the economic consequences of a war many did not choose and do not wish to own. That is why this column should not be read as another lament about oil volatility. Volatility is what markets do when politicians gamble with choke points. The real question is political. How many leaders, already bruised by inflation fatigue, budget stress and public distrust, can afford to let one man’s war become their inflation problem too?

Oil has a cruel way of disciplining fantasy. It reminds presidents that geography still matters, that allies are not auxiliaries, and that energy shocks do not respect campaign slogans. Trump may still believe he can bomb Iran, bully partners, calm drivers and cap prices all at once. But markets are asking a less flattering question: what if the bill has only just started arriving?

Copyright Business Recorder, 2026