The world economy is facing its worst oil shock in decades. The worst could still happen.

Rising oil prices continue to wreak havoc on the world economy due to the war with Iran. Now, some analysts say the worst is yet to come as the conflict continues.

The worry is that beyond the immediate effects from rising fuel prices, the war’s disruptions could come in waves – ones that will play out over weeks and months and leave few parts of the world economy untouched.

“We haven’t seen the severity of it yet,” said Samantha Gross, director of energy security and climate at the Brookings Institute. “I feel like the markets are underestimating the impact of the war. They seem to expect this war to go quickly, and they expect us to be back in the world before it’s over. And I don’t think either of those assumptions are true.”

The warning signs are already there. The global oil price benchmark, Brent crude – which largely influences US fuel prices – briefly rose to $119 a barrel last week, the highest level since the start of the war and the level last seen in July 2022 amid a wave of pandemic-era inflation. As of Monday, Brent prices had reached around $113 a barrel.

But even those new conditions could disappear quickly if the conflict in the Middle East remains unresolved, analysts say. In other words, current prices do not reflect the level of scarcity predicted by the long-term conflict.

“It’s clear to me that if this problem continues for more than three or four months, it becomes a global problem,” said Patrick Pouyanné, CEO of oil company Total, at a global energy conference in Houston earlier this month, according to Bloomberg News.

The most visible area of ​​oil pressure from the Gulf continues to be the Strait of Hormuz, where 20% of oil and natural gas liquids are transferred before Feb. 28. The movement of ships in this problem continues to decrease as Iran continues to have strict control over the way to issue permits from the US From 100 to 100 days the total number of ships is more than five ships, according to data from the International Monetary Fund.

That has left millions of barrels of oil, as well as other valuable commodities, stranded and unable to access global markets. As global businesses begin to destock, sourcing costs may increase.

Even beyond the Strait of Hormuz, key oil production facilities, including those for liquefied natural gas (LNG), a key energy input, have been affected by tit-for-tat strikes across the Middle East.

If the limit remains in place for much longer, and until those facilities fully come back online, the world will experience a power shortage that will have a major impact on the US economy.

The impact on US drivers is already significant. Average gasoline prices rose to $3.99 per gallon on Sunday, the highest level since the summer of 2022. Patrick De Haan, senior analyst at Gas Buddy, estimates that, sometime this week, motorists will have spent an extra $10 billion on gas compared to pre-war levels. That translates to a drop of about $35 a month in disposable income.

And that’s only a direct result from the high prices at the pump for regular drivers. Higher oil prices also translate into higher costs throughout the economy, as freight costs, as well as utility and packaging costs, rise. Diesel prices are now below the record high seen in June 2022.

“Rising oil prices will increase input, transportation and production costs at a time when demand is weak,” said analysts at Moody’s credit rating agency in a paper published last week.

The US is less affected by the rise in global liquefied natural gas prices due to an abundance of domestic supplies, particularly shale. In general, the US economy is somewhat immune to the current shock compared to similar episodes in the past given its domestic energy production capacity, some analysts said. Also, overall dependence on oil is lower than in the 1970s due to increased efficiency and greater dependence of the economy on services.

“Currently, the most appropriate reflection of the potential impact of the oil price shock on the US economy is a threat to growth rather than an imminent recession,” said analysts at S&P Global consultancy in a paper published last week.

However, the US economy would not be completely insulated from the global economic downturn caused by low consumption and investment in other parts of the world, caused by high electricity prices there.

“The current environment is toxic to the same risks that plagued the global economy before the last recession,” said BCA research firm strategist Peter Berezin in a note published overnight on Sunday.

Many analysts now say that, due to rising oil prices, the annual average rate of inflation in the US will be around 3% compared to the Federal Reserve’s target of 2%. The new figure would translate to an additional $150 per month, or $1,800 per year, for a household with monthly expenses of $5,000.

President Donald Trump continued to try to assure the markets that the situation is under control – although with each passing day, investors are growing more skeptical of his ability to move the price of the jaw. Yet he also continues to send mixed signals about US intentions: On Sunday evening, he said he believed a deal would be reached – then tweeted on Monday that Iran’s oil facilities would be destroyed if no deal was reached. He still has to prioritize any military option that would stabilize markets, including using US troops on the ground to seize Iranian oil infrastructure or targeting the Strait of Hormuz directly.

Analysts are now considering scenarios where the global oil price reaches $200 a barrel in the short term if Iranian exports are damaged by the US escalation, according to Reuters.

Despite that worst-case scenario, there has been undetermined damage to global energy supplies that is beginning to be felt, analysts say. Without significant change involving the US’s ability to directly control the flow of oil in the region, the price of oil is likely to rise indefinitely.

“Even if the conflict ends tomorrow, supply disruptions will continue for a long time, due to the damage we have seen to the energy infrastructure that needs to be repaired,” said Andy Lipow, president of Lipow Oil Associates consultancy. And even when key production facilities affected by the conflict come back online – something that could take months – “there will be more risks assessed for doing business in the Middle East, as there is no guarantee that this will not happen again,” he said.