Consumers and businesses around the world could face another round of cost-of-living pressure as oil prices surge past US$105 a barrel, with the escalating conflict in the Middle East disrupting crucial energy supplies and rattling financial markets.

Brent crude continued its sharp climb on Thursday after moving back above US$100 a barrel a day earlier, as traders increasingly priced in the possibility that the conflict involving the United States and Iran could drag on for months.

At the centre of the concern is the Strait of Hormuz, one of the world’s most important energy shipping routes. The conflict has effectively closed the waterway, restricting supplies of oil and natural gas from the Gulf from reaching international markets.

The disruption has pushed energy prices sharply higher and renewed fears that inflation, which has already placed considerable pressure on households in many countries, could accelerate again.

Those concerns intensified after US President Donald Trump indicated Wednesday that he did not expect the fighting to end before the US mid-term elections in November.

Speaking at a Republican Party convention in Texas, Trump suggested there was little prospect of an immediate end to the conflict.

Financial markets have responded nervously.

Chris Beauchamp, chief market analyst at trading platform IG, said investors were becoming increasingly concerned about the wider economic consequences of the oil shock.

“It feels like investors worldwide are now waking up to the crisis in oil markets,” Beauchamp said.

Further uncertainty has emerged in the Red Sea following reports that Iran-aligned Houthi forces seized Yemen’s port of Mokha, raising fresh concerns about possible disruption to another important international shipping corridor.

Natural gas prices have also risen sharply. In the United Kingdom, wholesale gas moved above 200 pence per therm for the first time since late 2022.

European gas storage levels are also below normal for this time of year, adding pressure as countries attempt to rebuild reserves ahead of the winter.

The energy shock is beginning to spread beyond oil and gas markets.

Government borrowing costs have climbed sharply, with UK 10-year bond yields reaching their highest level since 2007. Yields on 20- and 30-year government bonds have risen to levels not seen since 1998.

Long-term borrowing costs in the United States have also surged.

Higher bond yields make it more expensive for governments to borrow and can eventually filter through to consumers through products such as fixed-rate mortgages.

The biggest concern, however, remains inflation.

Persistently high oil prices can increase transportation, manufacturing and electricity costs, eventually feeding through to the prices consumers pay for goods and services.

For oil-importing economies, including countries across the Caribbean, an extended period of elevated crude prices could also increase the cost of imported fuel and other goods if the disruption continues.

Brent crude was trading at approximately US$104.76 a barrel on Thursday, September 10, after having traded around US$66 before the latest Middle East conflict began earlier this year.

With no immediate diplomatic breakthrough in sight, global markets are now watching both the Gulf and Red Sea closely for signs that disruptions to the world’s energy supply could worsen.