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The latest military escalation following US and Israeli strikes on Iran, and their retaliation, has unsettled international markets and raised concerns about the knock-on effects for Europe.

 

At the centre of the tension is the Strait of Hormuz, the narrow passage through which around 20% of the world’s oil and a third of global liquefied natural gas trade flows. Any disruption there quickly feeds into energy prices, trade and inflation across the continent, including Spain.

 

In the end, it will end up being felt in at least four major ways by the average person:

 

 

The first and most immediate impact is on oil. Since the end of last week, crude prices have climbed by more than 10%. Brent crude, Europe’s benchmark, has moved above $80 a barrel, up from $72.48 at Friday’s close, and some analysts warn it could approach $100 if the situation worsens. Iran holds about 10% of the world’s proven reserves and is the third-largest producer within Organisation of the Petroleum Exporting Countries.

 

Drivers in Spain are already feeling the effect. The Mediterranean Federation of Service Stations, FedMes, based in Valencia, says suppliers have announced sharp increases for this week’s deliveries. Diesel could rise by around 12 cents per litre and petrol by roughly six cents.

 

Gas markets are also reacting. After the war in Ukraine, Europe reduced its reliance on Russian gas and increased imports of liquefied natural gas from the Gulf. Spain is less directly exposed thanks to diversified supplies from Algeria, the United States and several African countries. However, energy is traded globally, so higher gas prices in Europe are likely to push up electricity bills as well.

 

 

Rising energy costs feed into transport and production, increasing the price of goods across the board. Economists warn of so-called second-round effects, where higher costs become embedded even if oil prices later fall. If inflation were to pick up again, the European Central Bank might slow or halt planned interest rate cuts. Inflation in the eurozone is about 1.7%, while in Spain it is slightly above the 2% target.

 

Financial markets have also reacted. The Ibex 35 has fallen for a second consecutive session and slipped below 17,300 points. Its heavy weighting towards banks, which tend to be sensitive to economic uncertainty, has increased the pressure. Airlines are also among the hardest hit, facing both higher fuel costs and flight disruptions.

 

 

Shipping companies including Maersk, MSC and COSCO have suspended or adjusted operations in the area. Avoiding the Strait of Hormuz can mean sailing around Africa to reach Europe, adding days to journeys and significantly increasing costs. Insurers have begun applying war risk premiums, which are ultimately reflected in the price of imported goods.

 

Air travel is also affected. Iberia Express has suspended its Madrid to Tel Aviv route until 10 March, while Air Europa has introduced temporary cancellations. The Lufthansa Group has halted flights to several Middle Eastern destinations. Higher kerosene prices and longer routes may lead to more expensive tickets if the disruption continues.

 

 

The effects of the war could eventually reach the weekly shop. Around a third of global fertiliser supplies, including ammonia and sulphur, pass through the Strait of Hormuz. The region also produces about 15% of the world’s polyethylene, widely used in packaging. Spanish agriculture depends on these inputs, whose costs are linked to gas and oil prices. Sustained disruption and oil above $100 a barrel could push up the price of fruit, vegetables and other essentials in the coming months – as if they weren’t already high enough as it is!