2 March 2026
Oil & Energy
Strait of Hormuz closure triggers biggest oil supply shock in history
Iranian forces declared the Strait of Hormuz "closed" on 2 March, disrupting the roughly 20 million barrels of oil and petroleum products that transit the chokepoint daily. Brent crude surged from around $65 before the conflict began to above $100 per barrel within days, with some analysts warning of $150 if the closure persists. The International Energy Agency called it the "greatest global energy security challenge in history." The IEA and US government coordinated a release of 400 million barrels from strategic reserves over 120 days — the largest in history — but analysts warn this falls well short of replacing Hormuz flows.
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Supply-side shock — a sudden reduction in oil supply shifts AS left, raising the price level and reducing real output simultaneously (stagflation risk). Link to AD/AS: cost-push inflation emerges as higher energy prices feed through to production costs across all industries. Evaluate: the severity depends on duration — a short closure may be absorbed; a prolonged one reshapes global trade.
17 March 2026
Monetary Policy
Central banks face stagflation dilemma as oil prices push up global inflation
The Iran conflict has put central banks in a bind not seen since the 1970s oil shocks. Higher energy prices are feeding cost-push inflation, yet the same price rises are suppressing growth by squeezing consumer spending and business investment. The Federal Reserve, already paused in its easing cycle, faces the prospect of inflation rising further while the labour market softens. The WTO estimates that if oil and gas prices remain elevated through 2026, global GDP growth could be cut by 0.3 percentage points. Economists at Capital Economics note that if Brent falls back to $70–80, the world economy "may absorb the shock with less disruption than many fear" — but the timeline depends entirely on the conflict's duration.
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Stagflation — rising inflation combined with slowing growth creates a policy dilemma: raising rates to curb inflation risks deepening recession; cutting rates to boost growth risks entrenching inflation. This is a classic conflict between the macroeconomic objectives. Evaluate using the Phillips Curve: the short-run trade-off breaks down in a supply shock — you can get both higher inflation and higher unemployment.
6 March 2026
Trade & Sanctions
Iran's pre-war economy was already fractured — sanctions, inflation at 40%+
Before the February 2026 strikes, Iran's economy was already under severe strain. The World Bank had projected its economy would shrink in both 2025 and 2026, with annual inflation approaching 60% — driven by years of US and UN sanctions, a collapsing rial and declining oil export revenue. In September 2025, the UK, France and Germany triggered the "snapback" mechanism under the 2015 nuclear deal, restoring full UN sanctions. Despite this, China continued to purchase the majority of Iran's oil exports, and analysts did not expect China or Russia to provide meaningful relief. The conflict has intensified all existing pressures while cutting off Iran's remaining hard currency earnings from oil.
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Economic sanctions as a policy tool — sanctions restrict international trade and financial flows, reducing a country's export revenue and access to imports. They cause currency depreciation (more rials per dollar), which fuels imported inflation. Evaluate: sanctions are only effective if widely enforced — China's continued oil purchases significantly undermined their impact on Iran's economy.
3 March 2026
Energy Markets
QatarEnergy declares force majeure — LNG supply crunch hits Europe and Asia
QatarEnergy, the world's largest LNG producer, declared force majeure on contracts following disruption to its Ras Laffan export hub. Approximately 20% of global LNG trade — previously flowing through or near the Strait of Hormuz — was effectively removed from the market. European gas prices surged 63% and Asian prices rose 54% in a single week. The disruption has delayed Qatar's major North Field East expansion project, which was expected to add significant new supply to global markets. US LNG exporters emerged as unexpected beneficiaries, with demand for American liquefied gas surging as buyers scrambled for alternatives.
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Supply reduction in a commodity market — when supply contracts sharply (leftward shift of S), price rises and quantity traded falls. In inelastic markets like energy, where consumers have few short-run substitutes, small supply falls cause very large price rises (PED close to zero). Evaluate: in the long run, demand becomes more elastic as consumers switch to alternatives — a key argument for renewable energy investment.
10 March 2026
Labour Markets
Gulf states face mass exodus of low-income migrant workers as conflict deepens
The conflict has devastated the labour market across Gulf states, with a mass exodus of the estimated 25 million low-income migrant workers — from South Asia, Southeast Asia and Africa — who form the backbone of economies in the UAE, Qatar, Saudi Arabia and Kuwait. The ILO warned of severe remittance shocks for origin countries including Pakistan, the Philippines and Nepal, which rely heavily on money sent home from Gulf workers. Dubai, long seen as a beacon for economic migrants, has seen its reputation as a stable destination shattered, with analysts describing the war as destroying the "illusion" of Gulf cities as reliably safe environments for migrant labour.
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Labour mobility and migration — conflict causes an involuntary reduction in the supply of labour in affected regions, raising wages for remaining workers but reducing output. Remittances represent a key income flow for developing economies — their collapse constitutes a negative multiplier effect on consumption and growth in origin countries. Evaluate: the longer-term impact depends on whether migrants return once stability is restored.
11 March 2026
Government Intervention
Governments across Asia and Europe scramble to subsidise fuel as prices surge
Faced with soaring energy costs, governments across Asia, Europe and the developing world have implemented emergency fuel subsidies and price controls. Sri Lanka reintroduced fuel rationing and a four-day government work week. Bhutan's Department of Trade appealed for calm as queues formed at fuel stations. European governments have drawn comparisons with the 2021–22 energy crisis following Russia's invasion of Ukraine, when billions in subsidies were deployed. The UK, which cut foreign aid to Middle Eastern and African countries by over 50% to fund military spending increases, faces criticism that its own consumers will bear a significant cost.
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Price controls and subsidies — fuel subsidies shift the supply curve right for consumers, reducing the market price below equilibrium. This protects consumers but costs governments revenue, potentially worsening budget deficits. Evaluate: subsidies address the short-run affordability problem but reduce the price signal that encourages switching to alternatives — potentially slowing the transition to renewable energy.