16/03/2026 07:03 AST
As regional tensions escalate and uncertainty grips global energy markets, oil prices and supply routes have come under intense scrutiny in Kuwait. In an interview, oil expert and the independent researcher in energy and economic affairs, Tareq J Alwazzan, discussed the potential trajectory of oil prices if the conflict continues.
Alwazzan told Kuwait Times that in global energy markets, the greatest danger is rarely the price of oil itself. The bigger risk lies in uncertainty over whether energy will continue to flow, adding "The global economy has repeatedly shown that it can adapt to higher oil prices over time. What it struggles with far more is disruption to supply. Few places illustrate that vulnerability more clearly than the Strait of Hormuz."
He continued, "In a global economy that consumes more than 100 million barrels of oil every day, a single maritime corridor can quickly become the point where oil prices, inflation expectations and global economic growth are repriced simultaneously. Each day, roughly 20 to 21 million barrels of crude oil and condensates - close to one-fifth of global oil consumption - pass through the Strait of Hormuz, making it one of the most critical arteries of the global energy system. These volumes represent more than a quarter of the world's seaborne oil trade, underscoring the strategic role of this narrow passage in the functioning of global energy markets."
For producers in the Gulf, including Kuwait, Alwazzan said that this shipping lane is far more than a geographic feature. It is the principal gateway through which energy exports reach global markets and sustain national revenues.
According to data from the US Energy Information Administration, the oil and condensates passing through the Strait of Hormuz each day represent an annual trade value estimated at roughly $700 to $800 billion, based on average oil prices in recent years. Yet the economic significance of the strait extends well beyond energy shipments. When industrial goods, consumer products, food supplies, and medical cargo moving through Gulf ports are included, the total value of trade associated with this maritime corridor may reach $1.1 to $1.2 trillion annually.
These figures also carry wider financial implications. More than 80 percent of the global oil trade is priced and settled in US dollars, while a significant share of maritime commerce is financed through international banking systems, letters of credit and marine insurance markets.
He indicated that as a result, a major disruption to shipping through the Strait of Hormuz would affect not only energy prices but also financial markets, the dollar's role in commodity trade, and the banking institutions that facilitate hundreds of billions of dollars in trade finance linked to energy shipments. For exporters such as Kuwait, whose economy remains closely tied to hydrocarbon revenues, stability in this corridor therefore supports not only export logistics but also the broader financial structure through which global energy trade operates.
On how high oil prices could rise, Alwazzan noted that in geopolitical crises, oil prices tend to respond less to political rhetoric than to the actual scale of supply disruption. If shipping through the Gulf continues without a meaningful interruption, markets are likely to incorporate a geopolitical risk premium into prices. Under such conditions, oil could move within a range of roughly $95 to $110 per barrel.
"For exporters such as Kuwait, this scenario may translate into stronger fiscal revenues in the short term, reflecting higher prices rather than physical shortages. A more serious scenario would involve the loss of 3 to 5 million barrels per day of global supply - roughly five percent of global production. In that case, oil prices could rise toward the $110 to $130 per barrel range. The most sensitive scenario, however, would arise if disruption were to affect the Strait of Hormuz itself," he explained.
Alwazzan stated that even with alternative pipeline routes across the Gulf, the capacity to bypass the strait remains limited. At most, about 6 to 7 million barrels per day could be redirected through export routes to the Red Sea or the Arabian Sea. A full closure could therefore remove roughly 10 million barrels per day from global markets.
"In such circumstances, industrialized countries would likely draw on strategic petroleum reserves, which together amount to roughly 1.2 billion barrels. Even so, the sudden loss of that much supply in a market already operating with limited spare capacity could temporarily push oil prices into the $140 to $180 per barrel range," he said.
OPEC+ pivot
In such conditions, production policy by the OPEC+ alliance becomes a critical stabilizing factor, as producers may adjust output levels to offset potential supply losses and limit extreme price volatility.
For Gulf exporters such as Kuwait, Alwazzan said the situation creates a familiar paradox: higher prices may boost fiscal revenues in the short term, but prolonged instability can weaken the global economy that ultimately sustains long-term energy demand. He added that the economies most vulnerable to a disruption in oil flows through the Strait of Hormuz would likely be energy-importing countries in Asia. Approximately 80 percent of the oil passing through the strait is shipped to Asian markets, particularly China, India, Japan and South Korea. "These economies depend heavily on imported oil to sustain industrial production, transportation networks and manufacturing supply chains," he said.
For exporters such as Kuwait, these Asian economies represent the core of long-term energy demand. Stable shipping routes through the Strait of Hormuz, therefore, underpin not only global supply but also the continuity of commercial relationships between Gulf producers and their largest customers.
Economic estimates indicate that every $10 increase in oil prices could add roughly 0.2 to 0.4 percentage points to inflation in energy-importing economies. At the same time, higher prices significantly raise the cost of energy imports; in large Asian economies, a $10 rise in oil prices could increase annual import bills by around $50 billion to $70 billion.
"From a macroeconomic perspective, rising oil prices often act as a hidden tax on economic activity, weakening purchasing power and slowing consumption," Alwazzan noted.
Although both Asia and Europe rely less directly on Middle Eastern oil than in previous decades, oil remains a globally priced commodity, meaning disruptions in one region quickly influence prices worldwide. Economic estimates suggest that every $10 increase in oil prices could add roughly 0.15 to 0.3 percentage points to inflation in advanced economies. In the United States alone, such an increase could raise the national energy bill by around $70 billion to $80 billion annually, with knock-on effects across transportation, manufacturing, and food supply chains.
At the same time, much of the financial infrastructure supporting global energy trade - including commodity financing, marine insurance and shipping finance - is managed by major Western financial institutions. A disruption in the Strait of Hormuz could therefore increase volatility in shipping costs, insurance premiums, and financial markets linked to global trade flows. Alwazzan stressed that the vulnerability of the Strait of Hormuz lies not in its geography but in its role as a central artery of the global energy system.
In a world consuming more than 100 million barrels of oil per day and relying on a limited number of maritime corridors to transport energy, a single waterway can become the point where energy prices, inflation expectations, and global economic growth are simultaneously repriced.
"This is why the stability of the Strait attracts constant attention from major naval powers seeking to safeguard the flow of global trade and energy," he said. For Kuwait, the implications are particularly significant. While the country benefits from strong financial reserves and extensive sovereign wealth investments that provide a buffer against energy-market volatility, its oil exports remain closely tied to shipping routes through the Strait of Hormuz. Higher oil prices may bring short-term fiscal gains, with each $10 increase potentially adding around $3 billion to $4 billion annually to Kuwait's revenues.
"But the broader lesson goes beyond immediate financial benefits. In an interconnected global economy, the stability of the Strait of Hormuz remains one of the quiet foundations of global economic stability," Alwazzan concluded.
Kuwait Times
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