The clock is ticking on the U.S.-Israeli war in Iran. The emerging view from oil industry executives and analysts is that the economic and market fallout from the war could escalate sharply if the Strait of Hormuz isn’t reopened within roughly the next one to three weeks. Even then, enough damage may have been done already to leave energy and many other prices higher for longer. 

These risks haven’t been clearly reflected in some widely followed markets, including stocks broadly and the benchmark Brent crude price. Stopgap measures to soften the blow of the oil cutoff have kept crude prices relatively low in the U.S. and European markets. But when those measures lose their effectiveness in early-to-mid April, analysts warn there will be little the U.S. or other governments can do to keep energy prices from rising dramatically. 

Iran has attacked civilian ships and energy infrastructure in its neighborhood, causing traffic in the narrow Strait of Hormuz to fall to a standstill. Roughly 20% of global oil supply normally moves through the approximately 100-mile waterway, which borders Iran. Some oil has been rerouted through pipelines, but they can only carry so much. The U.S. and others are releasing 400 million barrels of oil from strategic reserves — the biggest release on record — and the U.S. has temporarily lifted sanctions on some Russian and Iranian oil to give the market breathing room.

The White House says it believes the president’s military strategy will soon end the Iranian threat, allowing the price worries to fade.

But all agree there is no substitute for reopening the strait. Oil industry executives have in the past few days sketched out the risk of growing disruption from the war. 

“There are very real, physical manifestations of the closure of the Strait of Hormuz that are working their way around the world,” Chevron CEO Mike Wirth said Monday at S&P Global’s CERAWeek in Houston. Shell CEO Wael Sawan echoed him a few days later at the annual gathering of industry heavyweights. Disruptions that started in South Asia have “moved to Southeast Asia, Northeast Asia and then more so into Europe as we get into April,” Sawan said Wednesday.

The talk of the conference was the difference between so-called paper and physical prices, said Ben Cahill, director for energy markets and policy at the Center for Energy and Environmental Systems Analysis, University of Texas at Austin. 

Paper prices reflect trading in financial markets and are often the headline oil prices discussed in the press. They have generally remained lower than prices for physical delivery of oil, especially in Asia, which is the main buyer of crude from the Middle East.

Brent crude futures prices rose 36% from Feb. 27, the last day of trading before the started, through March 27, when they traded above $113 a barrel. But the Dubai price, which tracks physical delivery from certain Middle East sellers, is up 76%, more than twice the paper price, at $126. That price has been especially volatile lately. 

One reason paper prices are lower is they have regularly fallen in reaction to suggestions by President Donald Trump that the war could soon end or otherwise de-escalate. Traders call that “jawboning.” 

The looming possibility of physical supply shortages in the oil market appears to be blunting the effect of Trump’s jawboning. Financial markets reflect the reality that Trump has often managed to avoid worst-case scenarios, including when he attacked Iran’s nuclear program in June. Oil futures then spiked but quickly fell once it was clear the war wouldn’t spread. 

Retail firms are warning that the conflict in the Middle East is driving up costs and could lead to price hikes if the war continues beyond the short term. 

Instability in the Middle East region will not only restrain growth in the region but is also likely to have a knock-on effect on costs, selling prices, and consumer demand in the rest of the business, warned British retailer Next on Thursday. 

The company has accounted for £15 million ($20 million) of additional costs likely to arise from the conflict, such as fuel and air freight, assuming the disruption lasts for three months. Increased costs will not affect guidance as they have been offset by savings elsewhere, it added.

“Beyond the next three months, if we see these costs persist, then we will begin to pass costs through as higher pricing,” the company said early on Thursday as it reported results for the fiscal year ending January. The Middle East represents about 6% of Next’s total turnover. 

An extended war in the Gulf region could mean a double whammy for retailers as it may increase inflationary pressures and disrupt supply chains, leading to an overall higher cost base. It could also hurt demand as consumers are increasingly squeezed by the increased cost of living, resulting in less spending on discretionary items. 

The Iran war and effective closure of the Strait of Hormuz have sent oil and gas prices soaring since the first strikes on Feb. 28, and has upended inflation forecasts in Europe and beyond. 

Companies’ price-hike expectations and wages for new hires were some of the key inflation indicators that the European Central Bank will monitor, its Chief Economist Philip Lane said on Wednesday.

H&M said Thursday that “current geopolitical instability in the Middle East could, if extended, result in slightly additional cost pressure.”

H&M early Thursday reported first-quarter local currency sales that declined by 1%, but good cost control helped the company beat expectations on profitability, the company said. It was “a quarter marked by cautious consumption and large currency translation effects,” it said.

Shares fell 2.2% in late morning trading, partially paring earlier losses. 

Next shares, meanwhile, rose 5% after the London-listed fashion brand bumped up its pretax profit guidance by £8 million to £1.21 billion for the upcoming year.

“We see this update as reassuring on the strong UK trading and implied ability to pass-through costs, vs a well-known [Middle East] disruption,” Jefferies analysts said about Next’s print.

A trio of European energy CEOs has sounded a warning over energy supplies, amid the ongoing conflict in Iran and restricted access through the strategically vital Strait of Hormuz.

Amid volatile trade, crude prices have surged around 40% in recent weeks, at one point approaching $120 a barrel as investors raised concerns over a potential lack of supply.

Those concerns have been felt particularly in Asian countries so far, with the Philippines announcing an energy emergency, while South Korea says it is preparing for “worst-case scenarios.”

Japan’s Prime Minister Sanae Takaichi has asked the International Energy Agency to consider an additional release from global crude stockpiles, with the global energy watchdog having already coordinated the release of 400 million barrels of oil amongst member countries.

Japan will release national stockpiles on Thursday, with Takaichi confirming Tokyo will access the IEA stockpiles toward the end of the month.

But now there are fears the supply concerns will move westward.

“South Asia was first to get that brunt. That’s moved to Southeast Asia, Northeast Asia and then more so into Europe as we get into April,” Shell CEO Wael Sawan said at CERAWeek in Houston, Texas.

Sawan warned governments not to take actions that could magnify the impact of supply disruptions, adding that you cannot have “national security without energy security.”

Governments across Europe have already started introducing measures to shield households from rising energy costs.

Slovenia became the first country in Europe to introduce fuel rationing, Spain approved a 5-billion-euro ($5.8 billion) aid package, which included tax reductions on electricity and gas, as well as subsidies for transport operators, farmers and for the purchase of fertilizers.

European Union leaders have also discussed temporary measures to mitigate the impact of rising energy prices.

TotalEnergies CEO Patrick Pouyanné said the current oil products market is “dislocated,” telling CNBC that this is why “you see the impact in many countries, in Europe, on the gasoline price, diesel price, people being very unhappy.”

Federal Reserve Chair Jerome Powell last week pushed back when asked whether stagflation posed a threat to the U.S. economy. His successor may face a tougher challenge, as Wall Street forecasters raise their expectations of recession, brought on in part by the Iran war and potential for higher prices.

In recent days, economists have pulled up their risk assessments of a U.S. contraction amid heightened uncertainty over geopolitical risk and a labor market that for the past year has shown strains over the past year.

Moody’s Analytics’ model has raised its recession outlook for the next 12 months to 48.6%. Goldman Sachs boosted its estimate to 30%. Wilmington Trust has the odds at 45%, while EY Parthenon has it at 40%, with the caveat that “those odds could rapidly rise in the event of a more prolonged or severe Middle East conflict.”

In normal times, the risk for a recession in any given 12-months span is around 20%. So while the current predictions are hardly certainties, they signify elevated risk.

The situation poses a tough challenge for policymakers who are being asked to balance threats to the labor market against sticky inflation.

“I’m concerned recession risks are uncomfortably high and on the rise,” said Mark Zandi, chief economist at Moody’s Analytics. “Recession is a real threat here.”

Talk of an economic contraction has accelerated as the war with Iran has dragged on.

An oil shock has preceded virtually every recession the U.S. has seen since the Great Depression, save for the Covid pandemic. Prices at the pump have risen by $1.02 a gallon over the past month, an increase of 35%, according to AAA.

While economists still debate the pass-through impact from higher energy, the trend has held.

“The negative consequences of higher oil prices happen first and fast,” Zandi said. “If oil prices stay kind of where they are through Memorial Day, certainly through the end of the second quarter, that’ll push us into recession.”

Like his fellow forecasters, Zandi said his “baseline” expectation is that the warring sides find a diplomatic off-ramp, oil flows again through the Strait of Hormuz and the economy can avoid a worst-case scenario.

To be sure, economists as a lot are negative and subject to the old trope about predicting nine of the last five recessions. Markets also have been wrong about where the economy is headed. A portion of the yield curve — or the spread between various Treasury maturities — most closely watched by the Fed has sent repeated false recession signals for much of the past 3½ years.

But the threat of a prolonged war, pressure on a consumer who drives more than two-thirds of all growth, and a labor market that created virtually no jobs in 2025 collectively raises the risk that the expansion could falter.

“That path through is increasingly narrow, and it’s getting increasingly difficult to see the other side,” Zandi said.

Consumers also are pessimistic. Consumer site NerdWallet said its March survey showed 65% of respondents expect a recession in the next 12 months, up 6 percentage points from the month before.

Beyond energy prices, economists say the labor market is a key pressure point.

The U.S. economy created just 116,000 jobs for all of 2025 and lost 92,000 in February. While the unemployment rate has held steady at 4.4%, that’s largely been because of a dearth of firing rather than a burst in hiring.

Indeed, stocks have had a rough ride during the war. The Dow Jones Industrial Average has fallen more than 5% during the hostilities — important because consumer spending and sentiment have been supported by higher-income households benefiting most from rising equity prices.

Gross domestic product is on track to grow at a 2% pace in the first quarter, according to the Atlanta Fed’s GDPNow tracker of rolling data. However, that’s coming off an increase of just 0.7% in the fourth quarter, the product in part of the government shutdown. Economists had expected that the drain on growth in Q4 would translate to a boost in Q1, but the effects of that appear to be modest.

Still, if global leaders can find an end to the war soon, the economy again is expected to skirt the gloomiest predictions. Stimulus from the One Big Beautiful Bill in 2025 is projected to goose growth, with lower regulations and a boost in tax returns that could help consumers cope with elevated prices. A sustained rise in production also is a factor in the economy’s favor.

“There is support underneath,” said North, the Allianz economist. “That makes me real hesitant to use the ‘R’ word. But certainly, I think we’re seeing a slowdown this year.”

Farmers in the northern hemisphere are heading into the crucial spring months, during which major fieldwork must begin. Their peers in the south, meanwhile, are busy harvesting crops before the winter sets in.

However, their work now takes place as the Iran war creates serious supply constraints for essential fertilizer products — fueling massive price spikes and warnings of looming food insecurity.

Around one-third of the global seaborne fertilizer trade passes through the Strait of Hormuz, according to the UN.

The waterway, a critical shipping route that runs along Iran’s southern border, has been severely disrupted since the start of the war, with traffic effectively coming to a halt and several ships being hit by projectiles in or near the waterway.

Since the U.S. and Israel launched strikes on Iran on Feb. 28, the price of fertilizer — much of which is produced in the Middle East — has skyrocketed.

Fertilizer futures contracts are less liquid than other commodities, making prices more opaque. But analysts working in the sector told CNBC that they had seen the cost of FOB granular urea in Egypt — a bellwether of nitrogen fertilizers — jump to around $700 per metric ton, up from $400 to $490 before the war began.

In a Monday note, Oxford Economics’ Alpine Macro said urea and ammonia prices had surged by around 50% and 20%, respectively, since the war began. Other fertilizers, like potash and sulfur, have also risen in price.

The Middle East is a particularly large exporter of urea and nitrogen products, according to Chris Lawson, VP of market intelligence and prices at CRU.

“With the Strait of Hormuz essentially cut off, there’s a big chunk of global trade that isn’t able to move right now,” Lawson said. “We estimate around 30% of exportable suppliers are not really available to the market right now, that is Saudi Arabia, Qatar and Bahrain, but that also includes Iran.”

Iran, Lawson said, is an important producer of nitrogen-based fertilizers and one of the largest exporters globally.

“There’s a lot of traded supply that is at risk — 30% of global urea trade comes out of Iran and the Hormuz-constrained countries,” he told CNBC.

“It’s a long supply chain — if farmers aren’t able to get the urea that they need, crop yields will inevitably go lower. Nitrogen is the main nutrient that a crop needs to grow, [and] there will be inventories that can be drawn down, so you’re not really going to see an impact on crop yields and a loss of crop production until later in the year.”

Dawid Heyl, a co-portfolio manager for the Global Natural Resources strategy at Ninety One, told CNBC that nitrogen fertilizers like urea were at the forefront of the Middle East crisis because — unlike other fertilizer groups like potash and phosphates — nitrogen is “the one element that you need to get to the plant every single year.”

“You can skip a season of potash, you can skip a season of phosphates, but you can’t skip a season of nitrogen,” Heyl said.

With farmers in the northern hemisphere due to begin fertilizing their fields, the supply constraint has intersected with cyclical demand. Urea, one of the world’s most used fertilizers, is used in the growth of various crops, including maize, wheat, rapeseed and some fruits and vegetables.

“There’s a direct correlation to your nitrogen application and your agricultural yield in the end,” Heyl said. “That’s why I’m a lot more concerned about the current crisis than I was when Russia-Ukraine happened four years ago.”

When Moscow launched its full-scale invasion of Ukraine in early 2022, the two countries were major exporters of fertilizers, with Russia accounting for a significant proportion of global potash production. Sanctions on Russian exports added pressure to a market that was already experiencing shortages, pushing prices higher.

Meanwhile, China — another large exporter of fertilizers — has put restrictions on exports to protect its domestic market from shortages, news agency Reuters reported last week.

Ninety One’s Heyl said that markets had entered 2026 with fairly high stocks of basic food commodities that were reliant on fertilizer deliveries, meaning there were “buffer stocks” that might help offset some shortages of corn, wheat, soybeans and rice.

“If agricultural yields were [hypothetically] impacted by 5% this year, I don’t think we’ll be looking at starvation, but it would certainly cause food inflation,” he told CNBC, noting that emerging-market countries were more likely to feel the brunt of the impact.

“Unfortunately, the poorer countries in the world are quite often more exposed to these crises,” Heyl said. “I think some of the African nations that import a lot of grains, for instance, are going to be impacted.”

India, which imports nitrogen fertilizers as well as natural gas to produce them domestically, also faces high exposure to the shortages, Heyl added.

“I’m more concerned for [a country] like India, for regions like East Africa, which are going to be more vulnerable,” he said. “Emerging markets east of Suez and the global south are quite often the sort of last to be able to afford [inflated prices].”

But he noted that the U.S. was not completely insulated from the implications of a fertilizer price shock, noting that while America produces a lot of its own nitrogen fertilizer, the country “has not got self-sufficiency.”

According to the U.S. Fertilizer Institute, around a third of nitrogen, phosphate and potash fertilizers used in the United States are imported.

“It’s going to be inflationary for the farmer,” Heyl said of rising fertilizer prices trickling through to the United States. “Are there going to be certain regions that can’t get their hand on the fertilizer or have to ration?”

A total of 54 agricultural groups recently wrote to U.S. President Donald Trump to call for “much-needed market relief for America’s farmers” amid surging fuel and fertilizer prices.

“As planting season began in earnest across much of the U.S., the closure of the Strait of Hormuz sent fuel and fertilizer prices skyrocketing,” they said. “Maritime freight disruptions from the ongoing conflict in Iran pose significant consequences to food security here at home and around the world.”

The fallout from the Iran war is likely to expedite the shift away from fossil fuels and make countries think differently about the role renewables can play in shoring up energy security, analysts told CNBC.

The Middle East crisis has severely disrupted oil exports through the strategically vital Strait of Hormuz, which typically carries about a fifth of the world’s oil and liquified natural gas (LNG) and represents a key choke point for fertilizer trade.

It has shone a light on the extent to which the world remains deeply reliant on fragile fossil fuel trade routes, while surging oil and gas prices have rattled energy markets and triggered widespread inflation fears.

Asia’s reliance on imported energy means it now sits at the forefront of the global fossil fuel crisis, but supply disruptions are also hitting hard in Europe and Africa, where countries are responding to rising fuel costs and a considerable threat to food security.

The head of the International Energy Agency said the energy transition was moving “very strongly” before the Iran war began — but the fallout from the resulting energy shock means countries will likely direct even more investment toward clean energy sources.

“I expect one of the responses to this crisis will be [an] acceleration of renewables. Not only because they are helping to reduce the emissions but also, they are [a] homegrown domestic energy source,” IEA Executive Director Fatih Birol said at the National Press Club in Australia’s capital on Monday.

Clean energy sources dominated new power installations last year, for example, with renewables accounting for 85% of all new global power capacity, Birol said, citing solar as a primary driver of this trend.

“It is amazing. Ten years ago, solar was a romantic story — but now solar is a business,” Birol said.

Fossil fuels, however, such as coal, oil and gas, continue to dominate the global energy mix, meeting around 80% of worldwide demand in 2023, according to the IEA.

“The Iran crisis accelerates the shift to renewables and electrification. High fossil prices drive switching, making already cheap electrotech even more competitive,” Sam Butler-Sloss, research manager at global energy think tank Ember, told CNBC by email.

“In the old fossil fuel world, energy security meant diversifying fuel supply. With electrotech, nations now have the tools to increasingly eliminate imported fuels altogether.”

Electrotech, which refers to solar, wind, batteries and electrified transport, heating and industry, became the world’s dominant engine of global energy growth last year, Ember found in an analysis published in December. This was led by China’s emergence as the world’s first so-called “electrostate.”

Butler-Sloss said electric vehicle adoption had already been rising fast across the world, particularly in Asia, and this crisis adds a further tailwind to that trend. He estimated that scaling up EVs could save importers more than $600 billion a year in oil imports, describing the switch as a “security superlever.”

“This is Asia’s Ukraine moment. In the same way Ukraine compelled Europe to cut gas dependency, Hormuz will push Asia to cut oil dependency – but with even cheaper technology available,” Butler-Sloss said.

Ana Maria Jaller-Makarewicz, lead energy analyst for the Europe team at the Institute for Energy Economics and Financial Analysis (IEEFA), described the Iran war energy shock as “a wake-up call” for the European Union.

Spain serves as a prime example of how countries have been able to limit their exposure to fossil fuel price volatility, Jaller-Makarewicz said.

She noted that Spain’s government had come under heavy criticism following a catastrophic blackout last year, which some policymakers blamed on renewables, but that the country was now reaping the rewards from its investment in wind and solar technologies.

Private sector output in the euro zone sank to a 10-month low in March, amid mounting evidence of the impact the Iran conflict is having on the global economy.

The closely-watched S&P Global flash purchasing managers’ index (PMI) for the euro zone fell to 50.5 in March, marking a steep decline from the 51.9 reported in February.

Economists polled by Reuters had expected a shallower dip to 51.0. The 50.0 threshold separates expansion from contraction territory.

The reading prompted fresh warnings that the region is facing the specter of looming stagflation — a toxic combination of high inflation and unemployment, and stalling growth.

“The flash Eurozone PMI is ringing stagflation alarm bells as the war in the Middle East drives prices sharply higher while stifling growth,” Chris Williamson, chief business economist at S&P Global Market Intelligence, commented Tuesday.

“Firms’ costs are rising at the fastest rate for over three years amid the surge in energy prices and choking of supply chains resulting from the war. Supplier delays have jumped to their highest since mid-2022, largely linked to shipping issues.”

Euro zone companies surveyed by S&P Global scaled back hiring marginally during March, as bosses lowered output expectations for the year when compared with February forecasts, according to S&P Global economists.

“Stagflation” is often seen as a “worse case scenario” for economies and poses a dilemma for central banks because the tools they’d usually use to combat high inflation — higher interest rates — can stifle growth and employment, while lowering rates can boost growth but increase demand and inflation.

The euro zone is not alone in seeing private sector activity slow due to the Iran war, with PMI data from India earlier on Tuesday also showing output growth slowed to its lowest level since October 2022.

In revised forecasts released last week, the European Central Bank now expects economic growth of 0.9% in 2026, and headline inflation to average 2.6% this year.

That outlook could be optimistic, however, with S&P Global’s Williamson noting that the PMI survey’s price gauge was indicative of inflation accelerating close to 3%, “with cost pressure likely to add still further to selling price inflation in the coming months.”

“The outlook depends on the duration of the war and any potential lasting impact on energy and supply chains, but the flash PMI data underscore how the European Central Bank is no longer in a ‘good place’ with respect to growth and inflation,” Williamson said.

The March PMIs show the conflict in Iran is already having a significant impact on the euro area economy, J.P. Morgan’s Raphael Brun-Aguerre noted Tuesday.

“Overall, the survey points to a large near-term inflation impact from higher energy that could feed into core prices … The energy price shock could hit business profitability and has already damaged demand conditions and output more broadly in the region. Business sentiment is being hit significantly. European Commission data [out Monday] already showed a large hit to consumer confidence in March,” he noted in emailed analysis.

Early Tuesday, European Commission President Ursula von der Leyen said it was time for negotiations with Iran, given the “critical” nature of the global energy crisis.

“The situation is critical for the energy supply allies worldwide. We all feel the knock-on effects on gas and oil prices, our businesses and our societies, but it is of utmost importance that we come to a solution that is negotiated, and this puts an end to the hostilities that we see in the Middle East.”

President Donald Trump said in a Truth Social post Monday that, following talks with Iranian authorities, he ordered the U.S. military to postpone strikes on Iran’s power plants and energy infrastructure for five days.

He told CNBC’s Joe Kernen in a phone call shortly after the post that “we are very intent on making a deal with Iran.”

However, Iranian state media, citing an unnamed “senior security official” in a post on Telegram disputed Trump’s description of conversations, saying direct or indirect talks have not taken place between Washington and Tehran.

“There is been no negotiation and there is no negotiation, and with this kind of psychological warfare, neither the Strait of Hormuz will return to its pre-war conditions nor will there be peace in the energy markets,” state media reported the official as saying.

Trump countered later Monday morning that the U.S. and Iran “have had very, very strong talks” yielding “major points of agreement,” including that Tehran will “never have a nuclear weapon.”

Trump, speaking to reporters in Palm Beach, Florida, said his son-in-law Jared Kushner and U.S. special envoy Steve Witkoff participated in those talks Sunday evening with “a top person” in Iran.

“They want, very much to make a deal. We’d like to make a deal too,” he said. “We’re going to get together today by, probably, phone, because it’s … very hard for them to get out, I guess. But we’ll, at some point, very, very soon, meet.”

Trump said that if the five-day halt in strikes goes well, the parties could end up “settling this.”

“Otherwise, we’ll just keep bombing our little hearts out,” he said.

The president also said that he believes Israel will be “very happy” with the progress made with Iran so far.

He added that the Strait of Hormuz “will be opened very soon, if this works.”

Asked who would control the strait, Trump said it might be “jointly controlled” by himself and “whoever the ayatollah is,” suggesting that such a move would come as part of a “very serious form of regime change.”

In his Truth Social post earlier Monday, Trump said that the U.S. and Iran had “VERY GOOD AND PRODUCTIVE CONVERSATIONS REGARDING A COMPLETE AND TOTAL RESOLUTION OF OUR HOSTILITIES IN THE MIDDLE EAST.”

The U.S. president said these talks would continue through the week. It was not immediately clear who participated in the talks or when and where they were held.

U.S. stock futures rallied, the dollar fell against other major currencies, and oil prices tumbled on the news.

Speaking with Kernen, Trump said discussions with Iranian authorities had been very intense and that he remains hopeful something very substantive can be achieved.

The U.S. president also insisted on the same call that what is unfolding in Iran can be described as regime change, Kernen reported.

The White House did not immediately respond to CNBC’s request for additional information about the purported talks, and did not immediately respond to Iran’s claim that no such negotiations are underway.

The U.S. president on Saturday issued a 48-hour ultimatum to Tehran to reopen the Strait of Hormuz or face strikes on Iran’s power plants.

The narrow waterway is a key maritime corridor that connects the Persian Gulf and the Gulf of Oman. Roughly 20% of global oil and gas typically passes through it.

The deadline had been due to expire on Monday evening in Washington.

Iranian Parliament spokesperson Mohammad Baqer Qalibaf had said critical infrastructure and energy facilities in the Persian Gulf region could be “irreversibly destroyed” should Iranian power plants be attacked.

Shipping traffic through the Strait of Hormuz has virtually ground to a halt since the U.S. and Israel launched airstrikes on Iran on Feb. 28. Iran has retaliated by targeting ships trying to pass through the strait, with several incidents reported in recent weeks.

The Iran war has stoked global inflation fears and created what the International Energy Agency calls the largest supply disruption in the history of the oil market.

— CNBC’s Anniek Bao contributed to this report.

The head of the International Energy Agency said on Monday that at least 40 energy assets across nine countries in the Middle East have been “severely or very severely” damaged since the Iran war began, raising fears of prolonged supply disruptions.

Speaking at the National Press Club in Australia’s capital, IEA Executive Director Fatih Birol said damage to oil and gas fields, refineries and pipelines across the Middle East would take some time to repair.

His comments come as market participants closely monitor threats from the U.S. and Iran over energy facilities as the sprawling regional conflict enters its fourth week.

The Iran war has severely disrupted energy trade flows through the strategically vital Strait of Hormuz, creating what the IEA says is the largest supply disruption in the history of the global oil market. The global supply of liquefied natural gas (LNG) has also been reduced by roughly 20% since the conflict began on Feb. 28.

Birol said the fallout from the Iran war is equivalent to the two major oil crises of the 1970s and the 2022 gas crisis “put together.”

He added: “And, if I may, not only oil and gas. Some of the vital arteries of the global economy, such as petrochemicals, such as fertilizers, such as sulfur, such as helium. Their trade is all interrupted, which would have serious consequences for the global economy.”

U.S. President Donald Trump on Saturday threatened to “obliterate” Iran’s power plants if Tehran did not fully reopen the Strait of Hormuz within 48 hours.

The narrow waterway is a key maritime corridor that connects the Persian Gulf and the Gulf of Oman. Roughly 20% of global oil and gas typically passes through it.

Iran’s Parliament spokesperson Mohammad Baqer Qalibaf responded, saying that critical infrastructure and energy facilities in the Gulf region could be “irreversibly destroyed” should Iranian power plants be attacked.

Given that shipping has virtually ground to a halt in the Strait of Hormuz since the conflict began, the IEA’s Birol said the reopening of the waterway was the “single most important” solution to the global energy crisis.

He singled out Asia as being at the forefront of the Iran war energy shock and said the IEA was prepared to follow-up its historic release of 400 million barrels of oil to the market on March 11.

“If it is necessary, of course, we will do it,” Birol said.

— CNBC’s Anniek Bao contributed to this report.

Supply measures alone won’t be enough to mitigate “the largest supply disruption in the history of the global oil market” amid an escalating conflict in the Middle East, the International Energy Agency warned on Friday.

Instead of waiting for disrupted production to recover, lowering demand could ease pressure on consumers and help bring prices down more quickly.

Minimizing road and air transport, working from home where possible, and switching to electric cooking could significantly help cushion the shock for consumers, the agency said.

Heightened geopolitical risk has rattled traders, sending not only crude prices higher but also sharply increasing costs for refined products such as diesel and jet fuel, which directly impact transportation, logistics and consumer prices.

Oil prices have surged more than 40% since the start of the U.S.-Iran war on Feb. 28, reaching their highest levels since 2022 as supply has been severely disrupted, mostly due to the effective closure of the Strait of Hormuz. 

The strait is a narrow maritime corridor off Iran’s coast that connects the Persian Gulf and the Gulf of Oman and normally carries about a fifth of global oil consumption. 

Countries have already begun tapping strategic petroleum reserves, with hundreds of millions of barrels slated for release. 

The IEA last week agreed to release 400 million barrels of oil to address the supply disruption triggered by the Iran war — the largest such action in the organization’s history — without providing a timeline for when the stocks would enter the market. 

“Addressing demand is a critical and immediate tool to reduce pressure [on] consumers by improving affordability and supporting energy security,” the IAE said Friday, as it laid out a range of measures that can be taken by households and businesses to lower demand.

Among the most impactful steps are encouraging remote work where possible, increasing carpooling and public transit use, and cutting back on non-essential air travel.

Measures focus primarily on road transport, which accounts for around 45% of global oil demand.

Working from home where possible reduces fuel demand for commuting, while lowering speed limits, shifting from private cars to public transport, and alternating private vehicle access in cities, could further reduce congestion and fuel consumption, the agency said. 

Measures to shift liquefied petroleum gas (LPG) use away from transport and towards essential applications like cooking can also help keep prices lower, as can adopting alternative clean cooking solutions that reduce reliance on LPG.

Countries are also looking to fiscal measures to ease the pressure on consumers and prevent sharp rises in fuel prices that could add to inflationary pressures.

Spain is planning to reduce the value-added-tax (VAT) on fuel to 10% from 21%, according to a local media report citing sources familiar with the matter. The government will also eliminate a 5% tax on electricity, according to the report. 

Italy on Wednesday cut excise duties on fuel, while Germany’s finance ministry has said it is looking at ways to shield consumers from rising fuel prices, such as introducing a windfall tax on oil companies. 

Early Friday, international Brent crude futures with May delivery rose 1.3% to $109.93 per barrel, while U.S. West Texas Intermediate futures with April delivery traded largely flat at $96.20.

— CNBC’s Sam Meredith contributed to this report