29th October 2026
Ukraine, Russia and the Middle East are attacking energy infrastructure while the prospect of renewed US strikes on Iran adds another layer of uncertainty. The danger is that expensive oil and scarce diesel become a prolonged problem for households and businesses worldwide.
The oil market is increasingly being shaped by events on battlefields rather than by the usual calculations of supply, demand and economic growth.
On 29 October, Brent crude was trading at around $114 a barrel, having climbed above $117 earlier in the week. Prices have been supported by renewed fighting in the Middle East, attacks on energy infrastructure and reports that Washington may consider fresh military action against Iran after the US midterm elections on 3 November. Hopes of renewed negotiations have provided some relief, but the underlying risks remain.
The concern is not simply that oil could become more expensive. It is that several conflicts are affecting different parts of the energy supply chain at the same time, leaving the world with fewer reliable sources of fuel and less room to absorb another shock.
Three fronts, one energy problem
The war between Russia and Ukraine has increasingly involved attacks on energy infrastructure. Ukrainian strikes on Russian refineries can reduce the amount of diesel and other fuels available for export, while Russian attacks on Ukrainian infrastructure damage the country's energy system and economy.
Russia remains a major producer of oil, but producing crude is not the same as turning it into usable fuel. When refineries are damaged, the effects can be particularly severe in markets already short of diesel.
The International Energy Agency's October oil market report highlighted substantial losses in Russian and Middle Eastern diesel exports. It warned that supplies of diesel and other middle distillates could remain constrained well into 2027.
The second front is the Middle East, where attacks on oil facilities and threats to shipping have made the recovery of supplies increasingly fragile.
The Houthis in Yemen have intensified their campaign, and the group said it had struck Saudi Arabia's largest refinery. Saudi authorities had not immediately confirmed the claimed strike when Reuters reported it on 29 October. The possibility of damage to a major refining facility is nevertheless enough to alarm markets, given Saudi Arabia's importance to global oil supplies.
The third risk is the possibility of renewed American military action against Iran.
Reports that the United States could resume strikes after its midterm elections have raised fears of retaliation against Gulf energy facilities and shipping. Iran has previously threatened to respond to attacks, while the Strait of Hormuz remains a vital route for international oil shipments.
An escalation involving Iran could therefore have consequences far beyond the countries directly involved. It could affect oil production, refining, tanker movements and the cost of transporting fuel to customers around the world.
There is, however, no certainty that the United States will launch another attack. Diplomatic efforts continue, and a credible agreement could bring prices down just as quickly as a military escalation could push them higher.
Why the price of diesel matters so much
It is tempting to focus entirely on the headline price of crude oil. But for businesses and consumers, the availability and price of refined products can be just as important.
Diesel powers much of the freight industry, agricultural machinery, construction equipment and many buses and commercial vehicles. Heating oil is also important to households in rural areas.
The IEA has warned that global diesel markets remain under severe pressure. Disruptions to supplies from Russia and the Middle East have coincided with falling inventories and the approach of the winter demand season. It expects the replenishment of lost stocks to take time, potentially extending into the second half of 2027.
This creates a difficult situation. Even if crude oil prices fall, diesel prices may remain elevated because refineries cannot produce enough fuel, exports are disrupted or transport and insurance costs remain high.
For a haulage company, the effect is immediate. Fuel is a major operating expense, and a sustained increase can make previously profitable routes much less attractive.
For farmers, the costs of running tractors and other machinery rise. Food manufacturers pay more to move ingredients and finished products. Builders face higher transport and equipment costs, while delivery firms must decide whether to absorb higher expenses or pass them on to customers.
The result can be a chain reaction through the economy.
Could oil prices rise much further?
The risk of another sharp increase is real, particularly if the United States attacks Iran or if further damage is inflicted on major Gulf refineries or export facilities.
The most serious scenario would involve several disruptions happening together: reduced Russian fuel exports, further damage to Middle Eastern refining capacity and restrictions on shipments through the Strait of Hormuz.
In such circumstances, prices could rise well beyond current levels. There is no reliable way to attach a precise figure to that possibility because the impact would depend on the scale and duration of the disruption, the response from other producers and the availability of emergency stocks.
But the reverse is also possible. A diplomatic breakthrough, the restoration of damaged facilities or a sustained recovery in production could ease prices.
The US Energy Information Administration's October forecast assumed that Middle Eastern supply restrictions would gradually ease. It projected Brent crude averaging $105 a barrel in the final quarter of 2026 and falling further during 2027 as supplies recovered. Those projections were made before all the latest developments and should be treated as a scenario rather than a promise.
The important question is whether the assumptions behind a gradual recovery will survive the next round of attacks.
The threat to the world economy
Higher energy prices act much like a tax on households and businesses. Money spent on fuel cannot be spent on other goods and services, and companies facing higher costs may raise their prices, reduce investment or delay recruitment.
For central banks, this creates an uncomfortable dilemma. Rising fuel prices can push inflation higher just as consumers are becoming less able to afford everyday purchases. Interest rates may then remain higher than they otherwise would, even though the original problem was caused by war rather than excessive consumer demand.
That combination can weaken economic growth.
The IEA already expects global oil demand to fall during 2026, partly because high prices and a deteriorating economic outlook are forcing consumers and businesses to cut back. Its October report also found that global observed oil inventories were substantially below their levels before the conflict in the Middle East.
If energy prices remain high, the consequences could spread from transport and manufacturing into retail, hospitality and other consumer-facing industries.
Families who spend more on fuel, heating and electricity have less money available for eating out, shopping, holidays and other discretionary spending. Businesses dependent on that spending may then face weaker sales at precisely the time their own costs are rising.
That is how an energy shock can become a broader economic slowdown.
What does this mean for Britain and Scotland?
Britain cannot isolate itself from the international oil market. Even when the UK produces oil and gas in the North Sea, domestic production does not guarantee cheap fuel for British consumers. Prices are influenced by international markets, refining capacity, exchange rates and the cost of transporting supplies.
The effects are particularly relevant to Scotland's rural communities. Households in Caithness and Sutherland that use heating oil are exposed directly to kerosene prices, while motorists and businesses face higher costs for petrol, diesel and transport.
An increase in wholesale energy prices does not translate immediately or uniformly into every household bill. Electricity prices, for example, depend on a wider range of factors, and the timing of changes varies by tariff and price-cap period. But a prolonged rise in oil and refined-fuel costs would add pressure to household budgets already stretched by food, housing and other essential expenses.
Government relief can soften some of the immediate effects, but it cannot eliminate the cost of an international shortage. Nor can a one-off payment compensate indefinitely for higher prices at the pump or for fuel used to heat a home.
For businesses, the challenge is equally difficult. Small firms generally have less scope than large companies to negotiate fuel contracts, absorb sudden cost increases or change suppliers.
Preparing for a prolonged period of uncertainty
There is a danger in assuming that the latest oil-price increase will soon reverse. Equally, it would be wrong to predict an uninterrupted climb in prices. Markets can fall sharply when the prospect of peace improves, as the latest trading session demonstrated.
The more useful approach is to prepare for continued volatility and recognise that the effects may last longer than the immediate price spike.
Governments need to consider the resilience of fuel supplies, the availability of emergency stocks and targeted support for households and businesses most exposed to price increases. Businesses need to examine their fuel costs and their ability to pass on increases without losing customers.
For consumers, the problem is that many of the biggest expenses are unavoidable. People still need to heat their homes, travel to work, transport goods and buy food.
The danger is that the world is becoming accustomed to one energy crisis before another begins. Russian and Ukrainian energy infrastructure is under attack, Middle Eastern refining and shipping are threatened, and the possibility of renewed conflict involving Iran remains unresolved.
That is a worrying combination.
The central question is no longer simply whether oil will rise above $115 a barrel. It is whether the global economy can withstand months of expensive and unreliable fuel supplies without a much wider cost-of-living crisis and a further slowdown in economic growth.