Oil prices surged past $100 a barrel on Sunday evening, climbing to their highest level since Russia’s 2022 invasion of Ukraine as escalating tensions in the Middle East disrupted global supply routes and heightened fears of prolonged energy shortages.
Benchmark Brent crude jumped nearly 30 percent to $104 per barrel in early Monday, marking its strongest daily move in dollar terms since futures began trading in 1988. Prices briefly touched nearly $120 per barrel earlier in the session before easing slightly.
The rally follows output cuts by major Middle Eastern producers and disruptions to tanker traffic through the Strait of Hormuz, a critical corridor that carries roughly one-fifth of global oil supplies.
For Africa, the spike threatens to derail the continent’s emerging monetary easing cycle, just as inflation had begun to moderate across several economies.
Higher energy prices risk reigniting inflationary pressures, weakening currencies and complicating policy decisions for central banks in oil importing markets including South Africa, Egypt, Kenya and Nigeria which have been cutting interest rates since last year.
Global shockwaves
A recent report by Fitch Ratings warned that the escalating conflict involving Iran, the United States and Israel could create additional challenges for emerging market economies.
The global agency said the impact could be transmitted through several channels, including higher energy import bills, exchange-rate volatility, fiscal subsidy pressures, remittances and tighter access to international capital markets.
“We expect this would result in a stronger US dollar and weaken the market for debt issuance, particularly for highly speculative-grade issuers. Higher energy prices could put upward pressure on inflation, affecting monetary policy decisions globally,” Fitch said.
Rising energy prices and a stronger dollar could also increase the cost of servicing and refinancing debt for many emerging market governments.
However, the firm noted that several sovereign borrowers had already front-loaded their external borrowing earlier in the year, giving them some buffer against short-term market volatility.
Supply routes under threat
Energy markets have been rattled by the widening conflict in the Persian Gulf, which has disrupted oil shipments and raised security risks across one of the world’s most important energy corridors.
Shipping activity through the Strait of Hormuz has slowed significantly as tanker operators reassess risks in the region.
The disruption has forced some regional producers to reduce output. Iraq and Kuwait have begun cutting oil production, while earlier tensions had already reduced liquefied natural gas exports from Qatar.
Analysts warn that further production cuts could follow if export routes remain constrained. Major producers such as Saudi Arabia and the United Arab Emirates could also be forced to limit output if storage capacity begins to fill up.
Refining operations in the region have also been affected. BAPCO declared force majeure after an attack disrupted operations at its refinery complex.
Emergency stockpiles considered
Despite the sharp rally, prices eased slightly after reports that finance ministers from the Group of Seven and the International Energy Agency are discussing a coordinated release of emergency oil reserves to calm markets.
At the same time, Saudi Aramco has offered prompt crude supplies through a series of rare tenders in an effort to stabilise availability.
Still, oil markets remain highly volatile as traders weigh the possibility of a prolonged supply shock if disruptions to shipping and production across the region persist.
