Brent at $114: Europe incurs an additional $27 billion in just 60 days

Brent at $114.76: A Sustainable Risk Factored in by Markets

Brent crude settled at $114.76 per barrel, driven by the combination of the American blockade of Iranian ports and ongoing tensions around the Strait of Hormuz, a strategic passage for a significant portion of global oil trade. Markets are no longer factoring in a mere episode of conjunctural volatility, but rather a structural risk to supply and the security of maritime routes.

According to information reported by RFI based on the Wall Street Journal, Donald Trump reportedly asked his advisors to prepare for a prolonged blockade of Iran, deemed a less risky option than resuming bombings or withdrawing from the conflict. Iran's proposal for a step-by-step negotiation process clashes with Washington's demand to address the nuclear issue at the outset of discussions, making any rapid de-escalation unlikely.

The United Arab Emirates' surprise withdrawal from OPEC, announced to take effect from May 1st in the name of « national interest, » introduces an additional factor of uncertainty. This fracture within the oil alliance, already weakened by the conflict, could alter the balance of global production coordination. For importing economies, the message is clear: the risk premium on oil is not expected to diminish in the short term, as already highlighted by the analysis when Brent surpassed $108.

27 Billion Euros in 60 Days: Europe's Response to the Shock

In front of the European Parliament, the President of the Commission highlighted the direct impact of the conflict: Europe's energy import bill increased by more than 27 billion euros in just sixty days. This additional cost affects economies whose reliance on imported hydrocarbons remains structural, despite diversification efforts initiated since the 2022 energy crisis.

The European Commission has presented three strategies in response. The first focuses on better coordination between member states to replenish gas stocks, aiming to avoid a shortage situation as the next winter approaches. The second aims to protect consumers and businesses most exposed to rising energy prices. The third strategy targets reducing hydrocarbon demand through accelerated electrification.

Ursula von der Leyen also called for « full and permanent » freedom of navigation in the Strait of Hormuz, without tolls. Japan confirmed the passage of one of its ships through the area, a signal interpreted as positive for maritime security. However, the extent of the already observed additional costs underscores the continent's persistent vulnerability to an oil market supply shock.

Imported Inflation, Margins Under Pressure: The Economic Ramifications of Expensive Oil

With Brent crude prices persisting above $110, the impact is directly felt on transportation costs, fuel prices, and industrial production expenses across all energy-importing economies. For European households, this results in a reduction in purchasing power; for companies, it means squeezed margins, particularly in energy-intensive sectors.

This situation complicates the task of central banks, which are already grappling with the risk of stagflation. Energy-imported inflation limits the flexibility for any accommodative shift in monetary policy, even as signs of weakening demand multiply.

For major oil companies, the scenario produces the opposite effect. TotalEnergies posted a quarterly net profit of $5.8 billion, an increase of 51% year-on-year, driven by higher hydrocarbon prices, increased production, and market volatility. The group also partially restarted the Satorp refinery in Saudi Arabia after strikes affected several units on the site. In Iran, the national currency hit a historic low on the informal market—about 1.80 million rials per dollar—highlighting the severe economic suffocation caused by the US blockade and its ripple effects on the global energy market.