The snapback was as predictable as it was swift. On Monday, Brent crude plunged below $100 for the first time in two weeks after Trump announced he was postponing strikes on Iran’s power plants. On Tuesday, it was back above $104, climbing nearly 4% as traders digested three uncomfortable facts: Iran denies that any talks are happening, the Strait of Hormuz remains physically blockaded, and Trump’s five-day window is already 40% expired with no visible progress toward a deal.
West Texas Intermediate followed the same trajectory, advancing almost 4% to $92. The pattern is becoming depressingly familiar. Every hint of de-escalation triggers a sell-off in crude. Every subsequent reality check triggers a rally. The net effect is a market that whipsaws between fear and hope on a daily basis, making it almost impossible for businesses to plan, consumers to budget or central banks to calibrate policy.
The IEA Warning
The International Energy Agency dropped its latest Oil Market Report into this chaos on Tuesday, and the numbers were grim. Global oil demand growth for 2026 has been cut by 210,000 barrels per day, reflecting widespread flight cancellations in the Middle East and large-scale disruptions to LPG supplies. The IEA now expects demand to grow by just 640,000 barrels per day this year — roughly half the pace of 2025.
More striking was the language. IEA Executive Director Fatih Birol described the war’s impact on the global economy as a “major, major threat” — the kind of double emphasis that international bureaucrats deploy only when they are genuinely alarmed. The IEA noted that its member countries had already released 400 million barrels from emergency reserves on 11 March, but that the releases were merely cushioning the blow, not solving the problem. As long as the Strait of Hormuz is closed, no amount of reserve releases can replace the 20 million barrels per day that normally transit the waterway.
The Structural Damage
The most concerning aspect of the IEA report was not the headline demand cut but the structural damage it documented. Global supply chains that were painstakingly rebuilt after the pandemic are being severed again. Tanker routes that had normalised are being rerouted around the Cape of Good Hope, adding three to four weeks and billions of dollars to shipping costs. Insurance premiums for Gulf-bound cargo have increased tenfold. LNG contracts that European countries signed at a premium to secure energy independence from Russia are now undeliverable because the ships cannot reach the terminals.
This is damage that does not reverse when the shooting stops. Supply chains, once broken, take months or years to rebuild. Insurance markets, once spooked, take even longer to normalise. And businesses that have absorbed a month of energy chaos will factor that risk into their investment decisions for years to come. The Iran war may end this week or it may drag on for months. Either way, the economic scar tissue is already forming.
What the Market Is Pricing
The crude market is currently pricing a roughly 50/50 chance that Trump’s five-day pause leads to a meaningful de-escalation. That is the only way to explain a Brent price of $104 — below the $112-$120 range of the past two weeks, but well above the $75-$80 that prevailed before the war. If the pause collapses on Friday and Trump follows through on his threat to hit power plants, traders expect Brent to surge past $130 within hours. If a deal emerges, it could fall back toward $90.
The range of outcomes is extraordinarily wide, and it depends entirely on decisions being made by a small number of people in Washington, Tehran and Ankara. For the global economy, this is the worst possible situation: the price of its most important commodity is being determined not by supply and demand but by the mood swings of politicians and the progress of backchannel diplomacy that nobody can verify. The IEA called it a major threat. That may be an understatement.