“The Worst Is Yet to Come”: Oil Price Fluctuations, the “Time Bomb,” Have Not Fully Exploded Yet

Oil prices have already risen, but the worst effects have not yet arrived. Studies show that the impact of fuel price volatility on global trade takes up to 19 months to fully manifest. The Global Trade Alert organization has set up two scenarios.
The ongoing turmoil in the energy markets triggered by the Middle East situation continues to influence the outlook for global trade. The independent monitoring agency “Global Trade Alert” through modeling analysis of historical price shocks (including during the COVID-19 pandemic and the 2008 commodity crash) indicates that if the current conflict disrupts the oil market long-term, global merchandise trade growth will significantly slow down by the end of 2026.

The organization’s estimates show that, under sustained volatility, global trade growth will decrease by 1.75 percentage points compared to pre-war expectations. Simon Evenett, founder of the organization and a trade expert at the International Institute for Management Development in Lausanne, Switzerland, stated that the modeling results suggest that the resilience of the current trade system may be overestimated.

He pointed out: “We find that the ongoing intensification of fuel price fluctuations will slow global trade growth, and the full impact may take up to 19 months to materialize. The worst may still be ahead.”

The study emphasizes that the greater impact on trade is not the level of oil prices themselves, but their instability. Analysis suggests that, in cases where oil prices remain high but relatively stable, revenues for commodity-exporting countries increase, which can somewhat offset negative effects on manufacturing export economies (such as Japan or the Eurozone). The report states:

“A world with expensive but stable oil prices causes less damage to trade than a world with unpredictable oil price fluctuations. It is the volatility of oil prices, not the price level itself, that undermines commodity trade.”

The model sets up two scenarios:

One is a 25% increase in fuel price volatility over 12 months, roughly corresponding to the energy market conditions at the start of the Russia-Ukraine conflict;
The second doubles the volatility, approaching the extreme levels seen during the 2008 commodity crisis.
Since the U.S. and Israel launched strikes against Iran on February 28, oil prices have continued to fluctuate sharply. Iran then blocked the Strait of Hormuz, affecting about 20% of the world's oil supply; the U.S. responded by blocking shipping at Iranian ports.

Price paths show clear signs of instability: Brent crude oil quickly rose from about $70 per barrel at the start of the conflict to nearly $120, then fell back to $86 following diplomatic progress; but as negotiations around reopening the strait stalled last week, prices climbed again above $126 per barrel.

Evenett pointed out that current oil price volatility has increased by about 60% compared to previous levels, placing it between the two scenarios. Based on this trajectory, global trade growth is expected to decline by approximately 1.1 percentage points by the end of 2027.

Regional Divergence and Long-term Transmission Effects

Under the extreme scenario (doubling volatility), the impact varies significantly across regions. The model shows that trade declines in Africa and the Middle East could exceed 8 percentage points, while the U.S. could see a decline of nearly 1 percentage point.

In contrast, emerging Asia and Latin America show no significant overall impact, but trade growth in Japan, the Eurozone, the U.S., and Africa and the Middle East is affected to varying degrees.

The World Trade Organization (WTO) predicted in March this year that global merchandise trade would grow by 1.9% in 2026 and 2.6% in 2027; it also estimated that persistently high oil prices could reduce the 2026 growth rate by 0.5 percentage points. However, the latest analysis indicates that if volatility continues, the actual impact could far exceed this estimate.

From a transmission mechanism perspective, effects will not be immediate. Evenett explained that shipping contracts need to be renegotiated, inventories gradually absorbed, and consumer confidence in key markets eroded—all factors that cause shocks to be released gradually over months.

Meanwhile, there are preliminary signs at the supply chain level. Drewry data shows that since the conflict erupted, amid weak demand, container freight rates on key routes between Asia, Europe, and North America have remained roughly the same as a year ago, with no obvious increase.

Overall, in the context of sustained oil price fluctuations, the pressure on global trade growth will gradually accumulate, and the peak of the actual impact may still be ahead.