Oil prices rose on March 26, 2026, as fading hope of de-escalation in the Iran-Israel-US conflict pushed energy markets higher after Tehran denied reports of negotiations with Washington.
Futures for Brent crude, the international benchmark, climbed nearly 2 per cent a day ago to above $104.53 per barrel, while US West Texas Intermediate was near $92 per barrel. Meanwhile, Dubai crude, the Middle East benchmark, surged to a record $166.80 per barrel amid escalating tensions in the region.
Prices jumped after Iran rejected reports that it was in talks with US President Donald Trump’s administration over a peace proposal. The rise follows a brief decline on March 25 after reports that Trump had shared a 15-point plan to end the war.
Iranian Foreign Minister Abbas Araghchi told state media in an interview aired March 25 that Tehran was not engaged in direct talks with Washington and had “no intention of negotiating for now.” The White House also hardened its stance, with Press Secretary Karoline Leavitt warning Iran would be “hit harder” than ever before if it did not accept military defeat.
The breakdown in diplomatic signals has intensified fears that supply disruptions could persist. Iran’s effective closure of the Strait of Hormuz, a waterway that carries roughly one-fifth of global oil and liquefied natural gas (LNG) flows, has already curtailed shipping traffic and rattled global markets.
Oil prices have surged more than 40 per cent since February 28, when the US and Israel launched strikes on Iran, prompting several countries to implement fuel rationing and energy conservation measures.
Natural gas markets have also tightened. European gas prices jumped more than 30 per cent after Iran threatened regional energy infrastructure, including Qatar’s Ras Laffan gas facility, one of the world’s largest LNG export hubs.
The aviation sector has been hit particularly hard, with jet fuel prices rising nearly 60 per cent in the past week.
Supply shocks have also come from direct damage to energy infrastructure. Refineries including Saudi Arabia’s Ras Tanura and gas fields such as South Pars have been affected, reducing output and tightening supply further.
Analyses by Rapidan Energy Group, S&P Global Energy and others indicate oil prices are likely to remain elevated until shipping through the Strait of Hormuz fully resumes, despite efforts by countries to stabilise supply by releasing emergency reserves coordinated by the International Energy Agency (IEA). Earlier this month, the IEA announced the release of 400 million barrels of oil, including 172 million barrels from the US, but S&P Global Energy noted it may take months for this volume to offset the 430 million-barrel reduction in global supply recorded in March alone, particularly for Asian markets. Meanwhile, disruptions have expanded beyond tanker traffic to production itself, with 6-7 million barrels per day (bpd) of Gulf crude capacity potentially shut in, including at least 2 million bpd in Iraq, while Kuwait and other producers have curtailed output due to security and storage constraints.
“Re-starting field production of this scale will be a massive technical exercise. Depending on the reservoir and how long it is shut-in, it could take weeks, months or more to fully restore output. There is a similar concern on the downstream side as large refineries in the Gulf have stopped or curtailed operations,” said Jim Burkhard, vice president and global head of crude oil research at S&P Global Energy.
According to Janiv Shah, Vice President, Oil Markets, Rystad Energy, “Brent oil prices could reach $135 per barrel if the current situation persists for four months.”
While Tehran has said the strait remains open to ships not aligned with its adversaries, daily tanker transits have collapsed since the conflict began.
The widening conflict is beginning to trigger broader economic concerns. The International Monetary Fund (IMF) is running scenarios to identify countries that could require financial support if the war continues, Bloomberg News reported, citing people familiar with the matter. The IMF has asked country desks to assess current account pressures and potential financing needs, particularly in nations already running IMF programmes.
The United Nations Food and Agriculture Organization (FAO) has warned that prolonged disruption to shipping through the Strait of Hormuz could have cascading effects on energy markets, fertiliser supply chains and global food systems.
In a report titled Global Agrifood Implications of the 2026 Conflict in the Middle East, the FAO said the conflict could raise production costs, tighten agricultural supply and push food prices higher worldwide.
“While global food markets remain more stable than during previous crises, the current war underscores the vulnerability of interconnected energy and agrifood systems and the importance of coordinated international action,” the agency said.
The FAO urged governments to stabilise markets through alternative trade routes, market monitoring and targeted support for vulnerable import-dependent countries, while longer-term measures should focus on diversifying imports, expanding domestic agriculture and investing in renewable energy and fertiliser production.
Unlike oil markets, the fertiliser sector lacks coordinated global reserves, making supply disruptions harder to manage. Prices have already begun rising, with West Asian granular urea up nearly 20 per cent in early March compared with late February, while other fertilisers such as diammonium phosphate (DAP) have also become costlier. Because nitrogen fertiliser production relies heavily on natural gas, higher energy prices are pushing up manufacturing costs. The FAO estimates global fertiliser prices could average 15-20 per cent higher in the first half of 2026 if the war continues.
Rising fertiliser and fuel costs are already increasing production expenses for farmers, potentially reducing fertiliser use and tightening global grain supplies later in the year. At the same time, higher energy costs are raising expenses across agricultural supply chains, while food-import-dependent Gulf countries, which rely on imports for 70-90 per cent of their food, remain particularly vulnerable. Iran faces additional pressure, as the conflict has disrupted imports of staples and agricultural inputs while worsening currency depreciation and inflation.
Supply disruptions could also affect India’s fertiliser sector. A Crisil Ratings report released March 26 warned that supply chain disruptions linked to the conflict could reduce India’s annual production of complex fertilisers and urea by 10-15 per cent.
Profitability of fertiliser manufacturers could decline because of lower capacity utilisation caused by shortages of key raw materials, while higher import prices may increase the government’s fertiliser subsidy bill by Rs 20,000-25,000 crore.
“The ongoing issues in West Asia could disrupt the fertiliser supply chain at a crucial time for the kharif season. Disruption in LNG and ammonia supplies continuing for about three months could cut domestic urea and complex fertiliser production by 10-15 per cent,” said Anand Kulkarni, director, Crisil Ratings.
The impact could be partially cushioned by three months of fertiliser inventories, expected imports from alternative sources, and a government directive allocating 70 per cent of domestic gas supply to urea manufacturers, he added.
India’s fertiliser sector remains heavily dependent on imports. Around 20 per cent of urea and one-third of complex fertilisers, mainly DAP, are imported. Key raw materials such as natural gas, ammonia and phosphoric acid are also largely sourced from abroad.
West Asia is particularly important, accounting for around 40 per cent of India’s fertiliser imports in the first nine months of fiscal 2026. Dependence is even higher for production inputs, with 60-65 per cent of liquefied natural gas (LNG) and 75-80 per cent of ammonia imports coming from the region.
Separately, India has fast-tracked contracts to diversify crude oil and LPG imports, NDTV reported. The government is negotiating supply deals with multiple producers, including Russia, which supplied discounted crude to India after the Ukraine war began. Those purchases were later reduced as part of commitments tied to a February interim tariff agreement with the United States.
However, the war in West Asia has again disrupted global supply chains after tanker traffic through the Strait of Hormuz collapsed, pushing oil prices sharply higher.