The Hook: The war in the Middle East has effectively shut down the Strait of Hormuz, the channel through which nearly a quarter of the world’s oil passes, roiling global energy markets.

The Spillovers: The strikes have heightened geopolitical and economic uncertainty and refocused attention on energy supply and inflation. Oil and natural gas prices have surged, with knock-on effects across equities, bonds, currencies, and other commodities as investors reassess risks to their macro assumptions. Policymakers are weighing potential responses, while energy producers consider adjusting supply. Beyond the immediate volatility, shifts in production, demand, and global power dynamics over the past several decades have reshaped the way oil shocks transmit through markets and economies, and how governments can use energy as geopolitical leverage.

The Spillover is a production of the Council on Foreign Relations. The opinions expressed on the show are solely those of the hosts and guests, not of the Council, which takes no institutional positions on matters of policy.

Mentioned on the Episode:

“Outlook for Energy Demand,” International Energy Agency (IEA)

Ignacio Presno and Andrea Prestipino, “Oil Price Shocks and Inflation in a DSGE Model of the Global Economy,” Federal Reserve

John Kehoe, “Iran War Oil Inflation is a Nightmare for RBA,” Financial Review

Iran War Ignites Oil-Shock Stagflation Fears + Who Really Controls the Energy Market?

The Spillover