Page 8 - Policy Economic Report - March 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

The fertilizer shock is potentially more devastating, as the Gulf is a major artery for urea, ammonia,
sulphur and other fertilizer inputs, and conflict-related disruption has already tightened supply. Prices
for urea, the most popular synthetic nitrogen fertilizer, have increased by about 30% over the past
month, while soybean oil prices hit their highest level in more than two years.

Key impacts include:

? Supply Chain Disruption: Major shipping firms have suspended routes in the Middle East,
leading to several ships trapped or redirected, causing congestion in Indian Ocean ports.

? Rising Costs & Inflation: The conflict is causing a repricing of energy and goods, increasing global
inflation risks. Shipping rates from Asia to the Middle East have seen significant increases.

? Vulnerability of Emerging Markets: Developing nations are particularly exposed to higher
import costs for fertilizers, food, and energy.

? Regional Economic Impact: India is facing a widening trade gap and high import bills, while
Dubai’s luxury goods, gold, and tourism markets are experiencing a slowdown.

Impact on prices
The Middle East plays an important role in global fuel supply chains. The region accounts
for approximately 10% of the world’s seaborne diesel supply and nearly 20% of global jet fuel
shipments. The major risk here is a prolonged closure of the crucial Strait of Hormuz, which is virtually
the only way to ship the Middle East’s oil and natural gas to the rest of the world. Any disruption in
these supply flows can quickly push transportation and logistics costs higher around the world. As
shipping and fuel expenses rise, the increased costs are eventually passed on to businesses and
consumers, leading to higher prices for goods and services across global markets.

One of the most immediate economic consequences of the ongoing conflict has been a sharp rise in
global oil prices. Brent crude oil prices increased by around 15%, reaching nearly $105 per barrel,
marking the highest level recorded in more than a year. The heightened uncertainty has increased
volatility across the entire energy market, affecting not only crude oil prices but also the costs of refined
fuels such as diesel and jet fuel, which ultimately impacts transportation and global trade.

European benchmark natural gas futures have also skyrocketed and could more than double from levels
seen before the war if shipments through the strait are halted for longer than two months, according to
Goldman Sachs. Consumer price inflation in the European Union which stood at 2% in January could rise
by more than a percentage point if the conflict drags on for several months. If oil prices stay at their
current levels for several months, US consumer price inflation could rise from 2.4% in January to 3% by
the end of the year, according to Goldman Sachs.

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