Oil prices spiked sharply on Monday, with Brent crude reaching $120 per barrel in early trading, doubling from just two weeks ago when prices hovered around $60. Prices later retreated below $100 per barrel, but remained significantly higher than last week’s levels, reflecting mounting fears of a prolonged Middle East conflict and disruptions to global supply chains.
The crisis escalated from what U.S. President Donald Trump had initially described as a “four-week operation” into a broader conflict that threatens to strain global fuel availability. For Serbia, already grappling with a “triple oil encirclement” — including sanctions on Naftna Industrija Srbije (NIS), the cessation of Russian crude supplies via the Janaf and Druzhba pipelines, and now the Middle East conflict — the outlook is particularly challenging. Analysts warn that domestic food prices, which surged during the early stages of the war in Ukraine, may once again rise to levels that government price controls cannot stabilize.
“While the government has imposed significant price limits, the burden currently falls entirely on the oil sector. The question is how long these restrictions can be sustained, as prolonged measures could threaten supply, which is not in anyone’s interest,” said Tomislav Mićović, president of the Association of Oil Companies in Serbia. “International market trends cannot be ignored. We can mitigate the initial shock for a few days, but swift government action is required to restore market balance.”
Serbian authorities are exploring regulatory measures to curb inflation and support the economy. Current legislation allows excise reductions of up to 20%, but additional interventions may be needed to stabilize fuel markets. Mićović noted that the country faces local, regional, and global disruptions simultaneously, multiplying their effects. Local supply issues relate to NIS’s unresolved status, while regional disturbances stem from halted crude deliveries to refineries in Hungary and Slovakia, which now prioritize domestic markets.
Fuel prices in Serbia have reacted sharply, with diesel in neighboring Bosnia reported as cheaper by 40–50 dinars per liter. Former NIS majority owner Nebojša Atanacković warned that Serbia’s domestic reserves, consumed during past refinery stoppages, may not suffice if supply interruptions persist, particularly given the looming strategic deadlines for Russian partners’ ownership shares.
Energy Minister Dubravka Đedović Handanović emphasized that the government would act to protect consumers, citing successful interventions in 2022 at the onset of the Ukraine war that kept Serbian fuel prices among the lowest in the region. Nonetheless, rising fuel costs are expected to translate into higher food prices, given agriculture’s high energy dependency.
Economists caution that the main oil producers plan to curb production as storage facilities fill, while the closure of the Strait of Hormuz limits export routes. These factors risk short-term inflation spikes globally. Higher energy costs will drive up fertilizer and transportation expenses, creating secondary pressures on food prices, according to Erste Group analysts.
Global markets have reacted with volatility. Brent crude briefly exceeded $119 per barrel — levels not seen since mid-2022 — as fears grew of a prolonged disruption to maritime oil transport amid the U.S.-Israeli conflict with Iran. The Strait of Hormuz, a key corridor for 20% of the world’s oil and liquefied natural gas, remains effectively closed, forcing producers to halt output. Saudi Arabia has reduced output from two oil fields, joining Iraq and Kuwait in production cuts.
Governments are deploying emergency measures to shield consumers. Hungary capped fuel prices to protect households and businesses, releasing strategic reserves to ensure a stable supply. Russian President Vladimir Putin indicated that Moscow is ready to resume energy cooperation with European buyers while highlighting risks from the Middle East conflict.
G7 leaders are considering coordinated releases from strategic reserves, with timing dependent on market developments, German Finance Minister Lars Klingbajl said. South Korea announced fuel price caps for the first time in nearly 30 years, while India and Pakistan implemented measures to manage consumption and costs.
The recent volatility underlines oil’s role as both a geopolitical weapon and an economic vulnerability. Energy markets remain highly sensitive to political events, with potential for sustained price shocks even if the conflict resolves quickly. Analysts warn that consumers and businesses worldwide may face weeks or months of higher fuel costs as damaged infrastructure, disrupted logistics, and transport risks persist.
Investors are bracing for further spikes. Goldman Sachs projects oil could reach or exceed $140 per barrel, with Gulf processing halts potentially pushing prices above $150 per barrel. Central banks, including the National Bank of Serbia, face challenges in meeting inflation targets as rising energy costs ripple across the economy.
“Short-term oil prices, which may fall once the Iranian nuclear threat subsides, are a small price for U.S. and global security,” Trump wrote on Truth Social, emphasizing the political stakes of fuel costs ahead of midterm elections.
The intersection of energy, geopolitics, and global markets highlights how oil remains a critical instrument in shaping both foreign policy and economic outcomes worldwide.