Analysis of Global Energy Market Instability and Economic Effects Following the Iran Conflict

May 12, 2026, 16:29
AsiaAnalysis

Introduction

The conflict between the United States, Israel, and Iran has caused a historic disruption in oil supplies. This is mainly due to the closure of the Strait of Hormuz, which has also increased operational costs for many companies.

Main Body

The drop in oil supply is unprecedented, with an estimated loss of one billion barrels over ten weeks. Leaders from Saudi Aramco and the International Energy Agency, along with analysts from Morgan Stanley, have described this as the most significant disruption in the history of the oil market. However, Brent oil prices have remained relatively stable at around $108 per barrel. This is because China reduced its imports by 5.5 million barrels per day, and there was already a surplus of 2 million barrels per day at the start of 2026. Furthermore, investors believe that diplomatic talks between the U.S. and Iran will eventually reopen the Strait of Hormuz. At the same time, non-Middle Eastern producers, especially the United States, increased their exports by 5.5 million barrels per day. JPMorgan emphasized that while crude oil prices are stable, the cost of refined products in Asia has jumped by 60% to 120%. Consequently, the National Association for Business Economics (NABE) reports that U.S. firms are struggling. About 54% of economists stated that rising energy costs are a major problem, and material expenses are at their highest level since July 2022. Because of this financial pressure, only 13% of respondents expect profits to grow, and 50% believe there is a high chance of a recession in the next year.

Conclusion

The global energy market is currently in a fragile balance. While strategic imports and pricing are offsetting supply shocks, U.S. businesses continue to face rising costs and lower growth opportunities.

Learning

⚡ The 'Cause & Effect' Jump

To move from A2 to B2, you must stop using only "because" and "so." B2 speakers use Connectors of Consequence to show how one event leads to another in a sophisticated way.

🛠️ The Upgrade Path

A2 Level (Simple)B2 Level (Professional)Example from Text
So...Consequently, ...Consequently, the NABE reports that U.S. firms are struggling.
Because...Due to...This is mainly due to the closure of the Strait of Hormuz.
And also...Furthermore, ...Furthermore, investors believe that diplomatic talks...

🔍 Deep Dive: "Due to" vs. "Because"

At A2, you say: "Prices rose because the supply dropped." (Because + Subject + Verb).

At B2, you use Due to, which is followed by a Noun Phrase (a thing, not a sentence).

The Formula: [Effect] + due to + [The Reason/Noun]

Example: "Increased costs due to the closure of the Strait." (No verb after 'due to'—just the cause!)

💡 Pro Tip: The "Offset" Logic

The text mentions that imports are offsetting supply shocks.

What is "offsetting"? Imagine a scale. One side goes DOWN (supply drops). To keep the scale balanced, you put something on the other side to go UP (increase other imports). This action of balancing two opposite forces is called offsetting. Using verbs like this instead of "fixing" or "helping" is what makes you sound like a B2 speaker.

Vocabulary Learning

disruption (n.)
A disturbance or interruption in the normal flow or operation of something.
Example:The closure of the Strait of Hormuz caused a major disruption in global oil supplies.
unprecedented (adj.)
Never before experienced or seen; without previous example.
Example:The drop in oil supply was unprecedented, with a loss of one billion barrels.
significant (adj.)
Important or noteworthy; having a large effect or influence.
Example:Experts described the event as the most significant disruption in oil market history.
relatively (adv.)
In comparison to something else; somewhat or fairly.
Example:Brent oil prices remained relatively stable at around $108 per barrel.
surplus (n.)
An amount of something that is more than needed or used.
Example:China had a surplus of 2 million barrels per day at the start of 2026.
diplomatic (adj.)
Relating to the conduct of international relations or negotiations.
Example:Investors hope that diplomatic talks will eventually reopen the Strait of Hormuz.
refined (adj.)
Processed to remove impurities or improve quality.
Example:The cost of refined products in Asia jumped by 60% to 120%.
consequently (adv.)
As a result; therefore.
Example:Consequently, the National Association for Business Economics reports that U.S. firms are struggling.
struggling (adj.)
Having difficulty or facing challenges.
Example:Many U.S. firms are struggling to maintain profitability amid rising costs.
material (adj.)
Related to or made of a substance; substantial or important.
Example:Material expenses have reached their highest level since July 2022.
expenses (n.)
Costs or charges incurred in the course of business or living.
Example:The company’s expenses increased sharply due to higher energy costs.
financial (adj.)
Relating to money or the management of money.
Example:The financial pressure forced many companies to cut costs.
pressure (n.)
The force or influence that pushes or urges someone to act or behave in a certain way.
Example:The pressure to reduce costs led to layoffs across several departments.
respondents (n.)
People who answer or reply to a survey or questionnaire.
Example:Only 13% of respondents expect profits to grow in the coming year.
recession (n.)
A period of economic decline, usually marked by falling GDP and rising unemployment.
Example:Half of the respondents believe there is a high chance of a recession next year.
fragile (adj.)
Weak or easily damaged; unstable.
Example:The global energy market is currently in a fragile balance.
offsetting (v.)
Balancing or counteracting something else, often by providing an equal or opposite effect.
Example:Strategic imports and pricing are offsetting supply shocks.
opportunities (n.)
Possibilities for advancement, improvement, or success.
Example:Businesses continue to face rising costs and lower growth opportunities.
strategic (adj.)
Relating to long-term planning or important decisions that influence overall success.
Example:Strategic imports can help stabilize the market during disruptions.
pricing (n.)
The process or result of setting a price for goods or services.
Example:Accurate pricing is essential for maintaining competitiveness in volatile markets.