Global markets were rattled after the US and Israel launched coordinated strikes on Iran on February 28. Within hours, stocks slid, airlines and oil-importing companies suffered sharp losses, and investors rushed toward safe-haven assets such as gold and the US dollar.

The oil market delivered the clearest signal of alarm. Prices climbed rapidly as traders assessed the risk that escalating tensions could disrupt energy supplies from the Middle East.

On March 11, less than two weeks after the war started, the International Energy Agency (IEA) and its member countries agreed to release 400 million barrels of crude from strategic reserves, the largest emergency release in history, in an attempt to offset supply losses linked to the effective closure of the Strait of Hormuz.

Why do some wars move oil markets more than others?

The episode follows a familiar pattern. For decades, geopolitical crises have triggered sharp spikes in oil prices, only for markets to stabilise once the realities of supply become clearer.

The deeper question, however, is not whether wars move oil markets, but why some conflicts cause lasting disruptions while others fade quickly, and what investors can learn from past crises.

Looking back at major oil shocks — from the 1973 Oil Embargo and the Iran-Iraq War to the Gulf War, the 2003 Invasion of Iraq, and Russia’s invasion of Ukraine — history suggests the biggest price swings are rarely driven by war alone.

Instead, markets respond to a combination of supply disruptions, shipping chokepoints, policy decisions of the Organization of the Petroleum Exporting Countries (OPEC), and investor sentiment.

Fear moves faster than oil

When geopolitical conflicts erupt, the oil market’s first reaction is usually immediate and emotional.

“Oil markets are driven by the perception of risk,” Rockford Weitz, professor of maritime studies at Tufts University’s Fletcher School, told Forbes Middle East. “Sometimes that perception is driven by actual disruptions in supply.”

Historically, those risk premiums can be enormous. During the 1973-1974 oil embargo, crude prices jumped to $11.65 per barrel from about $2.90 a barrel, nearly quadrupling in less than a year.

A similar shock occurred during the Iranian revolution and the subsequent 1979-1980 oil crisis, when prices shot up from roughly $13 to $34 per barrel, again more than doubling.

Emilio Gonzalez, a national security and infrastructure expert and incoming president of energy infrastructure company NeutronX Corp, said these spikes reflect how markets incorporate geopolitical uncertainty almost instantly.

“Oil prices immediately absorb a geopolitical risk premium,” Gonzalez said, adding, “Fear creates the spike, but physical disruption determines whether the spike lasts.”

In other words, the initial surge is often driven by what markets fear could happen, rather than what has already occurred.

1973: The shock that reshaped the energy market

The 1973 Arab Oil Embargo remains the most transformative oil shock in modern history. In response to Western support for Israel during the Yom Kippur War, Arab oil producers cut exports to the US and several European countries. The sudden supply squeeze sent prices soaring and exposed the deep vulnerability of energy-importing economies.

George Alwan, special envoy to the Middle East for the state of Nevada, said the crisis permanently reshaped global energy policy.

“The 1973 Oil Embargo is the foremost example of how global oil market tension can make forever impacts on energy trade and diplomatic relations,” Alwan told Forbes Middle East. The crisis led to the creation of the IEA, the development of strategic petroleum reserves, and a fundamental shift in how governments manage energy security.

Unlike several conflicts later, the embargo involved coordinated supply restrictions, which meant the price shock persisted long after the initial crisis.

1979-1980: When panic multiplies the shortage

The Iranian revolution and the outbreak of the Iran-Iraq War produced the second great oil shock of the 20th century. Iranian production plunged by roughly 4.8 million barrels per day, around 7% of global output at the time.

Yet the price surge was even larger than the supply loss alone would suggest. According to Gonzalez, panic buying and precautionary stockpiling amplified the shock.

“Buyers did not just cover immediate needs but built inventories,” he pointed out. “Panic buying more than doubled the actual shortage.”

Spot oil cargoes traded as high as $40 to $50 per barrel, an example of how financial speculation and fear can magnify real disruptions.

1981-1986: The great price collapse

The Iran-Iraq War dragged on for years, keeping oil production in both countries far below pre-war levels. At the same time, the long-term demand response to the price spikes of the 1970s proved substantial, and global petroleum consumption declined sharply in the early 1980s.

Saudi Arabia voluntarily cut three-quarters of its production between 1981 and 1985, but even that was insufficient to prevent a collapse in oil prices. Nominal prices fell by roughly 25%, with real prices dropping even more. By 1986, the Saudis abandoned production restraint, ramping output back up and driving oil prices from $27 per barrel in 1985 to a low of $12 per barrel in 1986, a stark reminder that overproduction, combined with demand adjustments, can overwhelm geopolitical disruptions.

The Gulf War: When markets reverse quickly

Not all wars create lasting price shocks.

In the lead-up to the 1990-1991 Gulf War, oil prices surged to about $32 per barrel as Iraq invaded Kuwait and fears spread across global markets.

But once coalition forces launched Operation Desert Storm, prices fell rapidly, dropping into the $20-$22 range within weeks. On January 16, 1991, over six months after Iraq invaded Kuwait, the first major release of oil from the reserve was authorised, in cooperation with the IEA, contributing to the dip in prices.

Norbert Rücker, head of economics and next-generation research at Julius Baer, said this pattern of a sharp spike followed by a rapid reversal is common in conflicts where supply disruptions prove temporary.

“Strong gains occur when the conflict escalates,” Rücker told Forbes Middle East. “Prices peak when fears peak, then reverse once tensions ease.” In many cases, that adjustment happens within weeks or months.

2003 Iraq War: Confidence matters

The 2003 US-led invasion of Iraq provides another reminder of how market expectations shape oil prices. Despite the scale of the conflict, crude prices actually fell slightly once the war began, dropping by around $2-$3 per barrel from February to March of that year.

Why did this happen? Because the market believed that global supply would remain intact.

Alwan said the US’s military dominance helped reassure markets that energy flows would continue. At the same time, other producers increased output to offset Iraqi supply disruptions, demonstrating the stabilising role of global production networks.

Russia-Ukraine War 2022: A market that rewired itself

Russia’s invasion of Ukraine in 2022 resulted in a different kind of oil shock. Instead of a sudden supply collapse, the crisis triggered a massive rerouting of global energy trade.

Brent crude surged to as high as $139 a barrel in early March that year, before falling to roughly $83 in 2023 as markets slowly adapted.

Europe rapidly reduced its heavy dependence on Russian oil and gas, turning to alternative suppliers, including producers in the Middle East.

“The Russia-Ukraine war has had a lasting impact on oil markets due to Europe’s need for new suppliers,” Alwan said.

Countries such as the UAE benefited from that shift, becoming more important sources of crude and liquefied natural gas (LNG).

The lesson: even when wars disrupt supply, markets eventually reconfigure trade flows.

The Hormuz factor

The currant crisis with Iran has drawn attention to one of the most important vulnerabilities in global energy markets: maritime chokepoints.

The Strait of Hormuz, a narrow waterway between Iran and Oman, handles roughly 20% of the world’s petroleum flows. Any disruption there has immediate global consequences.

“Global oil markets are highly sensitive to threats to strategic maritime chokepoints such as the Strait of Hormuz,” Weitz said.

Gonzalez noted that the route carries more than 20 million barrels per day, meaning even the threat of disruption can cause prices to spike. But markets also differentiate between temporary threats and sustained closures.

If shipments are quickly restored from storage or rerouted, the long-term price impact may be limited.

OPEC: The market’s shock absorber

Another critical factor during geopolitical crises is the response from oil producers themselves.

“OPEC and non-OPEC producers often play a major role in stabilising or amplifying price swings,” Weitz said. Countries with spare production capacity, particularly Saudi Arabia and the UAE, can raise output to offset disruptions elsewhere.

Gonzalez described spare capacity as the oil market’s “shock absorber.”

“When OPEC has meaningful spare capacity, it can increase production and help stabilise prices,” he said. But when that cushion is thin, geopolitical shocks become far more dangerous.

When fear becomes reality

Ultimately, the difference between a temporary spike and a prolonged energy crisis often comes down to whether supply losses become permanent.

“If fields are damaged, exports are blocked, or sanctions remove barrels from the market, prices stay elevated,” Gonzalez said.

Alwan echoed a similar view, noting that the current conflict is particularly sensitive because it involves a region responsible for a large share of global production. “Energy security is the foundation of economic security,” he said.

For now, the market remains focused on whether the conflict will escalate further or whether oil flows through the Strait of Hormuz will normalise.

What investors should watch

History suggests that the key indicators during geopolitical crises are rarely the headlines alone. Instead, investors tend to watch a handful of structural signals. These include:

Spare production capacity.
If major producers can raise output quickly, supply shocks are easier to absorb.

Physical supply losses.
Markets react very differently to temporary disruptions versus long-term production damage.

Shipping chokepoints.
Routes such as the Strait of Hormuz can concentrate global energy risk into narrow corridors.

Inventories and stockpiles.
Strategic reserves—like the IEA’s recent 400-million-barrel release—can temporarily stabilise markets.

Market sentiment.
Fear, speculation, and precautionary buying often amplify price moves beyond what fundamentals justify.

The lesson from five decades of oil shocks

Looking back across half a century of crises, one theme emerges: wars alone rarely determine the trajectory of oil markets.

Some conflicts trigger only short-lived price spikes, while others reshape the global energy market. “The biggest lesson is that wars do not all affect oil the same way,” Gonzalez said.

What ultimately matters is not just the conflict itself, but how it interacts with supply, infrastructure, and market expectations.

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The story was updated on March 15 at 10:51 pm AST.

https://www.forbesmiddleeast.com/industry/economy/how-sovereign-backing-shapes-investor-risk-perception-in-gcc-corporate-debt-markets