As tensions escalate in the Middle East, concerns are growing that a looming economic crisis could eclipse the impact of the Covid-19 pandemic. The conflict in Iran poses a significant threat to global oil and gas supplies, raising alarms over potential worldwide repercussions.

Experts are sounding the alarm over the possibility of severe food shortages, flight cancellations, and widespread panic-buying. This stems from the fear that nations might soon face a fuel and energy drought if critical shipping lanes remain blocked.

Analysts caution that the situation has evolved beyond merely rising prices; it now presents the danger of a substantial supply shortfall. Some countries could struggle to procure enough energy to satisfy their needs, a scenario that could set off a chain reaction throughout the global economy, affecting sectors from aviation to agriculture.

Central to this crisis is the Strait of Hormuz, a crucial conduit for global energy resources. Approximately 20% of the world’s oil and gas flow through this narrow passage daily, making it a focal point of international concern.

Highlighting the gravity of the situation, Bank of America has predicted a potential surge in European gas prices. Should the strait remain closed for a prolonged period, prices could skyrocket from the current €29 to an alarming €500 this winter. Such figures would dwarf the price hikes experienced following Russia’s invasion of Ukraine, underscoring the dire economic implications of the ongoing conflict.

Bank of America has warned European gas prices could surge from around €29 to as high as €500 this winter if the strait stays shut for an extended period, far exceeding levels seen after Russia’s invasion of Ukraine.

Such a spike would trigger what analysts describe as a full-blown economic emergency across Europe, the UK and large parts of Asia, with energy costs spiralling and industries forced to cut back, The Telegraph reports

The situation has deteriorated rapidly after strikes hit major energy infrastructure in Iran and Qatar, including facilities responsible for a huge share of global gas supplies, with disruption expected to last months or even years as repairs are carried out.

A man rides a bike as fires and plumes of smoke rise after debris from an intercepted Iranian drone struck an oil facility, according to authorities, in Fujairah, United Arab Emirates, Saturday, March 14

Oil markets are already showing signs of panic, with supplies far tighter than official prices suggest as countries race to secure fuel.

Kurt Barrow, vice-president of oil at S&P Global Energy, warned the world could soon face outright shortages and rationing if the disruption continues.

He said: ‘If the Strait stays closed for two months, you’ll have plants without feedstock and we’ll get real rationing. We’ll have panic buying and hoarding.’

According to analysts, millions of barrels a day have already been knocked out of the market due to damaged infrastructure and transport disruption, raising the risk that supply chains could seize up entirely if the conflict drags on.

Jeff Currie, an energy expert at the Carlyle Group, warned the knock-on effects could be severe and immediate, hitting everything from travel to food production.

He said: ‘We may need to ground planes, shut chemical plants and accept lower crop yields.’

He added that oil and gas underpin large parts of the global economy, meaning shortages would not just push up prices but could quickly disrupt transport networks, manufacturing and agriculture. 

Actual barrels of the Dubai basket and Oman’s Murban are fetching close to $170 a barrel as Asian refiners scramble to buy anything they can. 

Jet fuel deliveries have hit $210 in Rotterdam and $240 in Singapore. 

There are also growing fears the crisis could worsen further if the conflict spreads to other key shipping routes, particularly in the Red Sea where vital energy supplies also pass through. 

‘We continue to watch for any signs that the Houthis may enter the conflict and imperil the Red Sea,’ said Helima Croft, a former CIA analyst now at RBC Capital. 

She warned even limited escalation could send prices surging again and deepen the crisis. 

She said: ‘Even just a few missiles or drones fired into the Bab el-Mandeb Strait would push oil prices several legs higher.’