[The Journal] The World is Running Out of Fuel

When conflict erupted in Iran, one of the world’s major oil-producing nations, markets braced for an immediate price shock. Governments and international agencies moved quickly, authorizing the release of strategic petroleum reserves

to calm panicked markets. The coordinated effort was designed to signal to traders and consumers alike that supply disruptions would be temporary and manageable.

At the same time, a quieter development was also helping to cushion the blow. Sanctioned oil from countries operating outside the reach of Western financial systems became more readily available as buyers grew desperate. This illicit supply

flowing through shadow markets acted as an unintended pressure valve, preventing prices from spiraling out of control in the early weeks of the conflict.

Together, these two mechanisms — official reserve releases and unofficial black-market flows — gave governments and businesses valuable time. Economists warned, however, that neither source was unlimited, and that the longer the war persisted, the more precarious the situation would become.

As the war in Iran dragged on with no resolution in sight, the stop-gap measures that had stabilized markets began to run dry.

Strategic reserves, tapped heavily in the early months, were drawn down to levels that regulators deemed unsafe to deplete further. Meanwhile, the shadow oil networks that had been supplying sanctioned crude faced increasing enforcement pressure, making those barrels harder and more expensive to source.

With both buffers exhausted, the full force of the supply shock began transmitting through the energy complex. Crude benchmarks surged, and the downstream

effects — higher gasoline prices, rising freight costs, and squeezed profit margins — rippled across virtually every sector of the global economy. Refiners that had locked in favorable forward contracts enjoyed a brief reprieve, but spot-market buyers faced steep increases almost overnight.

Economists described the situation as a textbook example of supply-side shock

compounded by geopolitical uncertainty, making traditional monetary policy tools far less effective at alleviating price pressures.

For energy-intensive industries, the sustained rise in fuel costs has moved from a manageable headwind to an existential pressure. Airlines, logistics companies, and manufacturers that rely heavily on petroleum-derived inputs have seen operating costs eat into

their margins at a pace that is difficult to offset through pricing adjustments alone. Some carriers have reinstated fuel surcharges, but consumer resistance has limited how aggressively they can be applied.

Smaller businesses face an even harsher environment. Unlike large corporations that can negotiate long-term supply contracts or hedge through derivatives markets, small and mid-sized enterprises are largely exposed to spot prices. For a regional trucking company or an independent manufacturer, a sustained doubling of diesel costs can threaten solvency within a matter of months. Policy discussions around targeted fuel subsidies and emergency relief funds have intensified, though fiscal constraints limit governments’ room to maneuver.

The broader economic concern is that prolonged high energy prices could trigger a demand destruction

cycle — where prices rise so high that they choke off economic activity, ultimately reducing demand and causing a sharp recessionary downturn. Until a diplomatic resolution to the Iran conflict emerges, markets appear to have few mechanisms left to moderate the pain.