Oil Breaches $100 as Geopolitical Tensions and Supply Cuts Rattle Global Markets

Crude oil prices surged past the symbolic $100 per barrel threshold in March, reigniting fears of a renewed inflationary spiral just as central banks around the world appear poised to slow the pace of monetary tightening. The rally comes amid a confluence of geopolitical tensions, unexpected supply disruptions, and a more aggressive stance from OPEC+.

Brent crude rose to $102.46 per barrel in intraday trading, the highest since mid-2022, while US benchmark West Texas Intermediate (WTI) climbed to $98.30. Traders cited renewed conflict in the Gulf, coupled with a surprise cut of 1 million barrels per day by Saudi Arabia and its allies, as the principal catalysts.

OPEC+ Turns the Screws

The supply squeeze was orchestrated by OPEC+, which signalled its intent to “pre-emptively stabilise” markets in the face of what it called “speculative downward pressure” and weaker-than-expected demand data from China.

“Energy markets have misjudged the resilience of global demand,” said Abdulrahman Al-Falih, spokesperson for the OPEC+ technical committee. “We will act decisively to protect producer economies from disorderly market declines.”

Analysts see the move as an effort by oil-producing nations to assert pricing power amid sluggish macroeconomic signals. Still, critics argue that the cuts may exacerbate inflationary pressures globally, particularly for energy-importing nations in Europe and Asia.

Repercussions for Inflation and Monetary Policy

The rally in crude has complicated the inflation outlook for developed economies. Headline CPI in the US rose by 0.8% in March, driven in large part by the spike in fuel and transportation costs. Core inflation, however, remained relatively stable at 3.4% year-on-year.

The Federal Reserve and the European Central Bank now face a more delicate balancing act: hold rates higher for longer to contain inflation or risk choking off already fragile growth.

“The inflationary impact of higher oil prices cannot be understated,” said Anna Clarke, chief economist at Meridian Capital. “Even if core prices remain anchored, consumer sentiment and business costs will inevitably feel the strain.”

Winners and Losers

Energy producers and oil majors have been the clearest beneficiaries. Shares of ExxonMobil, Chevron, and BP all posted gains of 4–6% following the OPEC+ announcement. Conversely, transportation and consumer discretionary sectors experienced declines as higher input costs eroded margins.

Airlines, in particular, are facing renewed pressure. The International Air Transport Association warned that soaring jet fuel prices could delay the industry’s post-pandemic recovery, particularly in Asia and Latin America.

Logistics firms and retail supply chains are also under renewed strain. Some are already passing costs onto consumers, potentially contributing to a second wave of price increases just as inflation had begun to cool.

A Flashpoint for Emerging Markets

Higher energy costs have dealt a blow to import-heavy emerging economies. Nations such as India, Turkey, and South Africa face widening current account deficits and mounting pressure on their currencies. Several central banks are now expected to raise rates defensively, even in the face of slowing growth.

In contrast, oil-exporting nations—Nigeria, Brazil, and Gulf states—are enjoying windfalls that could support public spending and currency strength, albeit at the risk of overheating domestic inflation.

Strategic Implications

Beyond the market implications, the resurgence in oil prices is reviving long-standing debates about energy security and the pace of decarbonisation. European leaders have renewed calls for investment in renewables, while in the US, the Biden administration has signalled that it may consider releasing additional barrels from the Strategic Petroleum Reserve (SPR) to ease domestic prices.

Still, the fundamental tightness of the market and the concentration of supply control within OPEC+ suggest that volatility may persist well into the second half of 2025.