What is happening to oil prices?

In early March 2026, global oil prices surged dramatically. Brent crude, the international benchmark, climbed from around $72.87 per barrel on February 27 to above $90 per barrel by March 6, a jump of roughly 35% in just over one week. West Texas Intermediate (WTI), the U.S. benchmark, followed a similar trajectory, surging to $90.90 per barrel on March 7 with a 12.2% gain in a single session. At one point during the week, crude prices posted an 18.5% weekly gain.

Heating oil jumped nearly 8% to $3.56, unleaded gasoline climbed more than 5% to $2.65, and natural gas prices also moved higher as broader volatility swept through global energy markets.

The catalyst was the escalation of military conflict in the Middle East.

The conflict, in facts

On February 28, 2026, the United States and Israel launched coordinated strikes on Iran. U.S. President Donald Trump stated the strikes were intended to "thwart" what he described as imminent threats from Tehran's nuclear and ballistic missile programs. He warned that a "big wave" of further attacks was coming.

Iran retaliated with missiles and drones across the Middle East. The conflict expanded to affect neighbouring countries, with attacks striking oil and gas infrastructure in Saudi Arabia, Qatar, and the UAE. Scores of civilians were killed in Iran, Israel, and Lebanon.

The most significant economic consequence was the effective closure of the Strait of Hormuz, the narrow waterway between Iran and Oman through which roughly 20% of the world's crude oil and liquefied natural gas (LNG) passes daily, approximately 20 million barrels of oil per day.

How the strait closed

Iran used a combination of drone strikes on tankers and threatening rhetoric to halt commercial maritime traffic. According to Reuters, the number of daily tankers passing through the strait dropped from 37 on February 27 to zero by March 5. At least four tankers were struck by drones, and maritime traffic dropped by 80% within the first few days.

An adviser to the commander-in-chief of Iran's Islamic Revolutionary Guard Corps (IRGC) told state TV that ships "should not come to this region" and would "face a serious response." Insurance companies stopped covering vessels transiting the area, and the cost of hiring a supertanker from the Middle East to China hit an all-time high of over $400,000 per day, nearly double the cost from the prior week.

The UK Maritime Trade Operations Centre issued an advisory warning of "increased risk of miscalculation or misidentification, particularly in proximity to military units." Several ports, including Dubai's Jebel Ali Port, suspended operations after debris from an intercepted missile sparked a fire.

Why oil prices surged

The price spike was driven by two primary forces:

1. Supply disruption risk. The Strait of Hormuz is the world's most critical oil chokepoint. Its effective closure threatened to remove millions of barrels per day from the global market. While some Gulf producers can redirect oil away from the strait to other ports, infrastructure damage from the attacks raised doubts about the feasibility of alternate routes.

2. War premium. Traders and hedgers rushed to lock in prices. On March 3, the Intercontinental Exchange (ICE) recorded a record 12.7 million energy futures and options contracts traded in a single session. U.S. crude producers scrambled to hedge their production against sharp market swings.

Prior to the conflict, the oil market had actually been bearish. J.P. Morgan's Global Research team had forecast Brent crude to average around $60 per barrel in 2026, citing soft supply-demand fundamentals and global oversupply. Supply was projected to outpace demand, and OPEC+ production cuts were expected to prevent excessive inventory buildup.

The war flipped that outlook. Analysts raised forecasts by roughly $1.50 per barrel, with both benchmarks now expected to average above $60 for the year. Goldman Sachs maintained a base case of $60 per barrel by Q4 2026 assuming no sustained disruptions but skewed risks to the upside.

What happened to gold and silver?

Counterintuitively, gold, the traditional safe-haven asset during times of war, experienced significant volatility rather than a sustained rally.

Gold initially surged to around $5,260 per ounce on March 3, 2026, as investors sought safety. J.P. Morgan analysts remained bullish, forecasting gold to hit $6,300 by the end of 2026. Bloomberg reported gold rose for five consecutive days as the war upended energy markets.

However, gold then fell sharply. On March 3, gold dropped as the U.S. dollar and Treasury yields climbed, and traders pared back rate-cut expectations on renewed inflation fears tied to the conflict. By March 4, gold sat at $5,189.47 per ounce, and Barron's reported gold was set for its first weekly drop in over a month.

Why would gold fall during a war? The key factor was inflation expectations. Higher oil prices raise the prospect of persistent inflation, which makes it more likely the Federal Reserve will hold interest rates higher for longer. Higher rates strengthen the U.S. dollar and increase Treasury yields, both of which tend to weigh on gold prices. In this case, inflation fears outweighed the safe-haven demand.

Silver followed a similar but more volatile pattern. Silver had been on a historic run, having surged more than 150% over the prior year and briefly crossing $100 per ounce for the first time ever. On March 2, silver was at $94.26 per ounce. By March 3, it had plunged to $82.46, a drop of $11.80 in a single day (roughly 12.5%). Silver's industrial applications make it more sensitive to economic slowdown fears than gold.

Stock markets

Global equity markets sold off heavily in response to the conflict and the oil price spike.

Rising oil prices raise inflation risk, which in turn may delay Federal Reserve interest rate cuts. This combination of higher costs and tighter monetary policy is what investors were pricing in.

Impact on Singapore

Singapore is particularly exposed to energy price shocks for two key reasons: it is a major global oil trading hub, and it relies on imported natural gas for approximately 95% of its electricity generation.

Petrol prices at the pump

Pump prices in Singapore rose immediately. As of March 4, most operators raised 95-octane fuel to S$2.92 per litre. SPC was the only operator to hold its price at S$2.87. For 98-octane, prices ranged from S$3.38 (SPC) to S$3.44 (Shell). Premium 98-octane reached S$3.66 at Shell. Diesel also climbed, with the highest price at S$2.70 (Shell, Esso, Caltex) and the lowest at S$2.57 (SPC).

By early March 10, prices had risen further, with 95-octane now at S$3.02 to S$3.05 across most operators, 98-octane at S$3.47 to S$3.55, and diesel at S$2.74 to S$2.88, according to Motorist.sg.

Electricity prices

Singapore's energy regulator cautioned that electricity prices could rise if global gas prices remain elevated. The Business Times reported that while market players believe Singapore's electricity market is now better equipped to handle volatility than during the 2021 global energy crisis, the risk remains real given the country's dependence on imported LNG.

Higher LNG prices would have a wide impact, affecting not just households but also commercial and industrial users. Singapore's central bank (MAS) expects core inflation and all-items inflation to average 1% to 2% in 2026, but sustained energy price increases could push these figures higher.

GDP outlook

Singapore's Ministry of Trade and Industry had projected GDP growth of approximately 2.5% for 2026. Analysts noted that a sustained oil price shock would likely prompt a downward revision of this forecast.

Impact on LNG supply globally

Prior to the conflict, global LNG supply was on track for a significant expansion. The International Energy Agency (IEA) projected global LNG supply growth of more than 7% in 2026, its fastest pace since 2019, driven primarily by North American capacity.

Global LNG supply was expected to reach 475 million metric tons in 2026, a 10.2% gain over 2025 levels. Asian spot LNG prices had been forecast to average $9.50 to $9.90 per million British thermal units (mmBtu), down from $12.45 in 2025.

The conflict disrupted this outlook. With the Strait of Hormuz effectively closed to LNG shipments from Qatar and other Gulf producers, European and Asian gas prices surged. The closure threatened to constrict a supply route responsible for approximately 20% of global LNG trade.

Do supermarket and grocery prices get affected?

Yes, but with a lag.

Oil prices affect food prices through multiple channels:

The USDA's February 2026 Food Price Outlook had already predicted that U.S. food prices would increase 3.1% in 2026, with food-at-home (grocery) prices rising 2.5%. These projections were made before the Iran conflict escalation.

Separately, Trump administration tariffs had already pushed prices higher in several categories by January 2026: coffee, tea, and cocoa up 12%, fish and seafood up 8%, fruits up 7%, and meat up 5% compared with pre-tariff trends.

A sustained oil price increase would add to these existing pressures. Research from the Federal Reserve has found that oil shocks push food prices higher even more reliably than they affect core inflation.

The macroeconomic picture

Tariffs as a pre-existing headwind

Before the war, the global economy was already contending with the effects of U.S. trade policy. The Trump administration had imposed sweeping tariffs throughout 2025 and into 2026, including 25% tariffs on goods from Mexico and Canada (March 2025), 25% tariffs on imported cars (March 2025), and global baseline tariffs of 10% (April 2025).

The effective U.S. tariff rate had risen from 2.7% (2022-2024 average) to 9.9%. The U.S. collected an estimated $287 billion in customs duties in 2025, nearly triple the 2024 figure. Yale's Budget Lab and the Tax Foundation estimated these tariffs would reduce long-run U.S. GDP by approximately 0.2% to 0.5%.

Combined effect of tariffs and oil shock

The convergence of trade barriers and an energy price shock creates a dual pressure on the global economy:

Microeconomic effects

At the household and firm level, the impacts are concrete:

Timeline of key events

Latest: Trump signals war could end soon, oil prices plunge

On March 9, oil prices experienced a dramatic reversal. After surging past $119 per barrel overnight following the appointment of hardliner Mojtaba Khamenei as Iran's new supreme leader, prices crashed nearly 10% within hours after Trump indicated the conflict could be nearing its end.

In a CBS News interview, Trump described the war as "very complete, pretty much" and said the U.S. was "very far ahead" of his earlier four-to-five-week timeline. At a gathering with Republican lawmakers at his golf club near Miami, he called the military operation "a short-term excursion."

Trump later escalated his rhetoric on the Strait of Hormuz, posting on Truth Social: "If Iran does anything that stops the flow of Oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far." He framed this as "a gift from the United States of America to China, and all of those Nations that heavily use the Hormuz Strait."

Brent crude fell to around $88.36 per barrel, while WTI dropped to $85.17, both down roughly 10% from their intraday highs. "I think there's a lot of optimism in the market," said Bob McNally, president of Rapidan Energy Group. "We saw that today with the collapse in oil prices on what we used to call verbal intervention from the President."

Russian President Vladimir Putin also spoke with Trump and presented proposals for "a quick political and diplomatic settlement," according to a Kremlin aide. G7 energy ministers are set to hold a virtual meeting to discuss a potential coordinated release of 300 to 400 million barrels from strategic petroleum reserves.

Despite the sharp pullback, analysts caution that volatility is far from over. IG market analyst Tony Sycamore expects crude to trade within a wide $75 to $105 range in the sessions ahead. Iran's Revolutionary Guard warned that Tehran would "determine the end of the war" and that it would not allow "one litre of oil" to be exported from the region if strikes persisted.

If the conflict continues

The following are not predictions. They are scenario-based observations from analysts and institutions, based on publicly available data.

Oil prices. If the Strait of Hormuz remains closed or disrupted, analysts at MST Marquee have warned this "could present a scenario three times the severity of the Arab oil embargo and Iranian revolution in the 1970s" and could drive oil prices into triple digits while LNG prices could retest the 2022 record highs. As of March 9, WTI futures had already reached $108 per barrel.

Inflation. A sustained oil price above $85 to $90 per barrel would raise inflation globally. Central banks may be forced to hold or raise interest rates rather than cut them, tightening financial conditions.

Recession. Multiple institutions have flagged that a prolonged conflict materially raises recession risk in 2026. Markets are already pricing in slower global growth.

Singapore. Continued high oil and LNG prices would mean higher electricity bills, higher petrol prices, and higher costs for goods and services. The 2021-2022 global energy crisis caused large swings in Singapore's wholesale electricity prices, and a repeat or worse scenario is possible.

Food prices. Sustained higher oil prices would amplify existing food price pressures from tariffs and supply chain costs. The IEA's finding that energy costs can account for up to 50% of food production variable costs suggests the impact would be significant.

Petrol for cars. In the U.S., if oil sustains near $100 per barrel, gasoline could approach $4 per gallon or higher, levels not seen since 2022. In Singapore, pump prices would continue to climb from current levels, which are already at multi-month highs.

Fitch Ratings has noted that the Strait of Hormuz closure is likely to be temporary given its vital economic role, and that global oil market oversupply should limit price rises. However, this assessment is contingent on the conflict not escalating further.

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