Hormuz Oil Flows Down 30%, Turkey Lifts Inflation Target to 24%: War Reshapes Energy Markets

The Iran war is now imposing a direct, measurable shock to global energy flows. The Strait of Hormuz, chokepoint for roughly one-third of seaborne oil trade, saw flows fall nearly 30 percent in the first quarter of 2026, representing a drop of approximately 6 million barrels per day. This is not a marginal disruption; it is reshaping energy cost structures and inflationThe rate at which prices rise across an economy. expectations across the developing world. Turkey's central bank did not raise its inflation target on a whim; it explicitly cited the effects of elevated energy prices resulting from the war.

The ripple effects are already visible in sovereign balance sheets and policy responses. India has requested an extension of its Russian oil waiver from the US as Middle East supply disruptions persist. Singapore Airlines posted earnings misses attributable to Air India's losses, themselves driven by elevated jet fuel costs tied to regional instability. Air New Zealand is forecasting a substantial full-year loss and cutting services due to fuel cost inflationThe rate at which prices rise across an economy.. These are not hedge funds adjusting derivatives; they are real-economy operators cutting capacity and raising prices.

Emerging market central banks are burning through foreign exchange reserves to defend their currencies against the oil-driven inflationThe rate at which prices rise across an economy. shock. Policymakers from the Philippines to India have deployed accumulated reserves to stabilize exchange rates as the war pushes up commodity prices. Meanwhile, developed-market central banks are facing their own dilemma; the ECB's Christine Lagarde and other officials are now weighing whether elevated energy costs will force rate hikes despite broader growth concerns. The probability of an ECB June rate hike has fallen but is not zero, reflecting genuine uncertainty about whether energy inflation will deanchor broader inflation expectations.

The structural question is whether OPEC+ can or will offset the Hormuz disruption via production increases elsewhere. OPEC+ has announced plans to complete a series of quota hikes, but on-paper production gains rarely translate to actual barrels in periods of regional conflict. Prices could stabilize if demand destruction (via recession or EV adoption acceleration) offsets supply loss, but that outcome would signal economic pain in major oil-importing regions.