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. 

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.”

Nissan Motor plans to introduce a new type of hybrid to the U.S. market that drives like an all-electric vehicle but is powered — not driven — by a traditional gas-powered engine. 

The new Nissan “e-Power” is called a series hybrid. It uses the engine as a generator to power the vehicle’s electric motors that then propel the vehicle. It operates like emerging extended-range electric vehicles, or EREVs, but has a smaller battery and doesn’t require a plug. 

It’s also different from a traditional hybrid, such as the Toyota Prius, because the gas engine in those vehicles is used to propel the vehicle. The series hybrid’s engine just keeps the battery charged to power the electric motors in the vehicles.

The e-Power hybrid system for Nissan is planned to launch domestically later this year in a new version of its popular Rogue compact SUV. 

Timing for such a vehicle could be ideal for Nissan with climbing gas prices, slower-than-planned adoption of EVs and an expected surge in hybrid sales amid new entries, according to officials.

After losing billions of dollars on EVs, automakers such as Nissan are turning to hybrid vehicles to meet customer expectations for fuel economy and to help with driving performance.

S&P Global Mobility expects hybrids in the U.S. this year to increase to 18.4% of new vehicle sales, up from 12.6% last year and 7.3% in 2023. It’s forecasting pure EVs, meanwhile, will be 7.1% of new vehicle sales, down from 8% last year.

“This is a unique powertrain for the for the U.S.,” Kurt Rosolowsky, Nissan North America vehicle evaluation and test engineer, said during a media briefing. “This is an electrically driven vehicle, as far as what is powering the wheels, but it doesn’t have a plug, and you fill it up with gas like you do with a normal car.”

The current Nissan Rogue, depending on the model, can achieve more than 30 MPG, according to U.S. Department of Energy and the U.S. Environmental Protection Agency.

Nissan’s vehicles historically been less fuel efficient than those from its larger Japanese rivals. Honda Motor and Toyota Motor, the latter of which pioneered traditional hybrids with the Prius and continues to dominate the sector in the U.S.

Nissan declined to discuss the possibility of expanding the e-Power system to other vehicles in the U.S., but confirmed the new system is modular and capable of working with many different engines.

“If we were to expand this to other vehicles, you can theoretically bolt this onto another gasoline engine of a different size and have more options for an e-Power system,” Rosolowsky said.

The surge in fuel prices since the U.S. and Israel attacked Iran nearly two weeks ago is already driving up airfare. Consumers’ appetite for travel this year will dictate just how much.

Cathay Pacific on Thursday said it would roughly double fuel surcharges on tickets starting March 18.

Earlier this week, Australia’s Qantas said it is raising fares to help cover its costs, Scandinavian Airlines said the “unusually rapid and substantial increase” in fuel prompted it to raise prices, and Air New Zealand pulled its financial outlook “until fuel markets and operating conditions stabilise,” adding that it has made “initial fare adjustments.”

“If the conflict leads to continued elevated jet fuel costs, the airline may need to take further pricing action and adjust its network and schedule as required,” Air New Zealand said.

U.S. airline CEOs and other executives will update investors on Tuesday at the J.P. Morgan Industrials Conference in Washington, D.C.

Analysts expect an earnings hit at least in the first quarter if not the first half of the year, though the impact will depend on how long higher fuel prices last.

“We think a hit to 1Q EPS appears almost certain at this point,” UBS airline analysts Atul Maheswari and Thomas Wadewitz wrote in a note last week.

United Airlines CEO Scott Kirby said last week on the sidelines of an event at Harvard University that higher fares were likely on the way because of the surge in fuel prices.

Kirby said travel demand is still strong, however. Two other senior airline executives at U.S. carriers, speaking on the condition of anonymity because they weren’t authorized to speak to media, also said travel demand has held up. If those trends persist, it could give airlines more pricing power, but that will depend on the war’s duration.

“Airlines never met a higher fare they didn’t want,” said Scott Keyes, founder of flight deal company Going, previously known as Scott’s Cheap Flights.

So what should consumers do?

Keyes said travelers can’t lose by booking early, as long as they’re not buying restrictive basic economy tickets. That way, customers can try to exchange or cancel their tickets and buy cheaper ones if airfare ends up falling.

“If you book a $500 summer flight today, and two weeks from now the price drops to $350, you can call up the airline and get the $150 difference back as a credit. Heads you win; tails the airlines lose,” he said.

Jet fuel is airlines’ biggest cost after labor, accounting for about a fifth or more of expenses, depending on the airline.

United alone spent $11.4 billion last year on fuel, at an average price of $2.44 a gallon, according to a securities filing. U.S. jet fuel on Wednesday was going for $3.78 a gallon, according to Platts.

Jefferies airline analyst Sheila Kahyaoglu said in a note Thursday that she expects “the most acute financial impact to airlines from surging oil prices to be in the next 30-90 days as airlines have been booking yields for close-in flights assuming a much lower fuel price and carriers cannot retroactively raise fares.”

She said Delta Air Lines and United, which produce most U.S. airline profits, are better positioned than other carriers because of their high-end demand. Risks to demand, particularly for more price-sensitive customers, include the recent jump in gasoline prices.

Most U.S. airlines no longer hedge fuel costs, or lock in prices using futures and other securities. Southwest Airlines was one of the last holdouts, and it quit last year. A spokesman for the Dallas-based airline told CNBC that Southwest currently has “no plans” to resume hedging.

Hyperscalers are significantly ramping up their AI capex spending — and increasingly using credit markets to fund it.

But investors say this shift is challenging mega-cap tech giants’ so-called ‘fortress balance sheet’ status, and rips up what they call the “unspoken contract” that kept speculative AI spending largely separate from debt markets.

After Amazon, Meta and Google-owner Alphabet all unveiled sizable increases in their full-year capex spending plans during earnings season, UBS data indicates that aggregated capex spend among AI hyperscalers could top $770 billion in 2026 — some 23% higher than previously expected.

In a Feb. 18 note, UBS credit strategists said such increases imply a $40 billion to $50 billion ramp-up in borrowing from hyperscalers, pushing public market debt issuance to between $230 to $240 billion this year.

Al Cattermole, fixed income portfolio manager at Mirabaud Asset Management, said this tilt toward the bond market is dramatically shifting the dynamic between hyperscalers and investors.

“For years, we’ve been told this AI spend would be funded by generated cash flow — that it is equity risk, it is speculative, and not to worry about it from a credit point of view,” Cattermole told CNBC in an interview.

“There now seems to be a change in the unspoken contract that while we would continue to lend to these businesses, really AI capex was still going to be equity or cash funded….By bringing capex spend into the debt markets, you now have the question of credit worthiness.”

Last September, Oracle tapped the bond market for some $18 billion in one of the biggest debt issuances on record. Others have rapidly followed, with Google-owner Alphabet recently issuing some $20 billion in debt, including a rare 100-year sterling-denominated bond.

“What if, in three years, these Nvidia chips get outstripped by a Chinese competitor, and I’m lending for five or eight years, and in year three, my data center is obsolete?” he said.