Economy
World weathers historic oil shock, but depleted reserves bring risks
The world has coped unexpectedly well with the disappearance of over a billion barrels of oil since the start of the Iran war, yet the risk of sharp price increases still hangs as hopes for a durable peace fade and buffer stocks run low.
Tehran’s throttling of the Strait of Hormuz in response to the U.S. and Israeli attacks launched on Feb. 28 fed fears of a catastrophic global energy crunch.
The ensuing four-month conflict did, indeed, create the biggest energy disruption in history, according to the International Energy Agency (IEA). At its worst, the headline supply loss was 14 million barrels per day.
But worries that Asia and Europe would run out of gasoline, diesel or jet fuel never materialized. And after peaking around $126 per barrel in April – still some $20 below the 2008 record – benchmark Brent oil prices are now lower than they were when the conflict began.
“This suggests traders viewed the disruption as serious but manageable, reflecting confidence in today’s more resilient energy and economic systems,” said John Baffes, senior economist at the World Bank.
Since the oil crisis of the 1970s, World Bank data shows that oil intensity – a measure of the role oil plays in economic activity – has fallen by more than half in most advanced economies and roughly 20% in emerging and developing countries.
Beyond that structural shift, however, three specific factors have been responsible for forestalling the worst-case scenario during the Gulf crisis.
Saudi Arabia and the United Arab Emirates (UAE) found alternative routes to export. Asia, led by China, curtailed buying. And countries around the world likely pulled around 1 billion barrels of oil from their reserves, including via an IEA-led record stocks release.
China adjustments ease global pressure
When the war broke out, China had nearly 1.4 billion barrels of oil stored, according to the U.S. Energy Information Administration. That was more than the 1.2 billion barrels held by all the 32 members of the IEA combined, including the United States’ 413 million barrels.
China’s rapid electric vehicle adoption in recent years along with flexibility in oil and petrochemicals output also helped, said Ilia Bouchouev, of the Oxford Institute for Energy Studies.
“They are managing the market a lot better than (the Organization of the Petroleum Exporting Countries) used to,” said Bouchouev, a former head of derivatives trading at Koch Global Partners.
The adjustments by China, the world’s biggest oil importer, helped ease global demand pressure. And the IEA’s scheme to release 400 million barrels of reserves provided further breathing room at a time when U.S. President Donald Trump was repeatedly stating an end to the war was imminent.
“Traders always took the view this can’t go on much longer,” said Neil Atkinson, a former IEA official.
Washington’s narrative management, that more supply was coming, also made hedge funds reluctant to hold long positions that bet on prices rising, Societe Generale analysts noted.
With the signing last month of a preliminary agreement to end the war, there has been a rapid swing back towards business as usual.
“The market seems to have decided that this peace deal is for real,” Atkinson said.
Lost buffer risks more spikes
In reality, however, little is as it was before the war.
Even as Saudi Arabia, Kuwait, Qatar, Iraq and Bahrain resume production and exports, it will be years in some cases before they fully repair the damage to their energy infrastructure caused by Iranian attacks.
While prices may reflect expectations of a rapid return to pre-war supply levels, data on tanker traffic through the Strait of Hormuz tells a different, more pessimistic story.
And with the clock ticking on the 60-day cease-fire between Washington and Tehran, progress towards a final agreement to end the war has been achingly slow, with key questions – including the fate of Iran’s nuclear program – still unresolved.
Meanwhile, there’s the mammoth task of rebuilding global oil inventories.
The global economy weathered the shock by drawing down stocks at a record pace, according to IEA data, draining the very buffers designed to protect it from supply crises.
“It doesn’t mean we can’t operate without one, it just means that forward prices could be more prone to spikes,” Bouchouev said.
That kind of volatility is costly.
Every $5 increase in oil prices adds roughly $190 billion in annual costs to the global economy, according to Reuters calculations based on oil demand of 104 million barrels per day.
Replenishing oil stocks, never cheap, has likely been made more expensive by the war.
Before the conflict, the European Central Bank (ECB) had estimated 2027-2028 oil prices at $63 to $64 per barrel. That’s now risen to an average of $65 to $75, according to an ECB report published in June.
At current Brent prices, it would likely cost more than $70 billion to replace reserves drawn down to mitigate Iran war supply loss.
But until that is done, the world is operating without a safety net in an environment still fraught with uncertainty.
“The markets may be underestimating the risk of further oil flow disruptions,” said Saul Kavonic, head of research at MST Marquee. “Iran is likely to continue to find pretexts to stymie flows through the strait.”
Türkiye’s state-owned Halkbank raised an additional $1.1 billion from international markets following the dismissal of a U.S. criminal case against the lender, the bank announced Tuesday.
In a statement submitted to Türkiye’s Public Disclosure Platform (KAP), Halkbank said the conclusion of the case in its favor had improved its access to overseas funding.
The bank noted that it had raised $3.9 billion in external funding before the case was resolved through instruments, including Additional Tier 1 (AT1) subordinated debt and bilateral loan agreements.
The additional financing brought the amount of external funding raised before and after the dismissal to $5 billion.
Halkbank also reported a rapid increase in the number of counterparties following the conclusion of the legal proceedings.
It said it established a $5 billion Global Medium-Term Note (GMTN) program on July 17 after receiving approval from its board of directors.
The programs allow financial institutions to issue multiple debt instruments in international markets under a single framework, providing flexibility over maturities, currencies and issuance timing.
Halkbank said feedback gathered during a non-deal roadshow with fixed-income investors indicated strong interest in its planned issuances.
The lender added that it would continue to strengthen its presence in international markets and assess alternative funding channels to support a sustainable funding structure.
Fifty-four provinces in Türkiye recorded year-over-year increases in exports in the first seven months of the year, while 22 surpassed $1 billion (TL 48.10 billion) in shipments, the Trade Ministry said Tuesday.
Türkiye’s total exports rose 2.9% on an annual basis to $25.6 billion in what marked the highest-ever July shipments. In the January-July period, exports grew 3.4% to $161.6 billion.
Istanbul remained the country’s largest exporting province last month, with exports of about $5.9 billion, although its shipments fell 0.6% from a year earlier, the data showed.
The northwestern Kocaeli ranked second with almost $3.4 billion, down 1%, followed by the western Izmir with nearly $2.1 billion, up 6.9%.
Precious and semi-precious stones were Istanbul’s largest export category, generating $968.3 million. Knitted clothing and accessories followed with $517.2 million, while boilers and machinery accounted for $498 million.
Istanbul’s largest export market was the U.S., with shipments worth $406.7 million, followed by Germany at $352.6 million and the United Arab Emirates (UAE) at $344 million.
In Kocaeli, motor vehicles were the leading export category at $1.2 billion, followed by mineral fuels and oils at $335.9 million and electrical machinery and equipment at $334.8 million.
Germany was Kocaeli’s largest export market at $339.1 million, followed by the U.K. with $334.1 million and the U.S. with $169.6 million.
Mineral fuels and oils led Izmir’s exports at $351.3 million, followed by motor vehicles at $233.8 million and boilers and machinery at $212.5 million.
Germany was Izmir’s largest export destination at $191.9 million, followed by the U.S. at $128.5 million and Niger at $119.7 million.
Southern Mersin posted the largest increase in export value among provinces last month, with exports rising by $194 million from a year earlier.
Izmir ranked second with a $135 million increase, followed by southern Antalya with a $129 million rise.
Canada announced retaliatory tariffs of 15% to 50% on a range of U.S. goods Tuesday, escalating a trade dispute between the longtime North American allies.
Ottawa’s retaliation will take effect Sept. 8, a timeframe earlier outlined by Prime Minister Mark Carney after U.S. President Donald Trump’s 50% duties came into place Saturday.
Canadian officials said Tuesday that the retaliatory tariffs will match U.S. levels, with impacts on industries including steel, dairy and electronics.
Canada’s government also announced a $5.4 billion (CA$7.5 billion) aid package for impacted firms and workers.
“This is an unprecedented challenge imposed on Canada. But Canada will meet the moment,” Finance Minister Francois-Philippe Champagne said.
“I think what Canadians can see this morning is that we stand united,” he added. “Canada must respond and today we are, in a proportionate, targeted and strategic way.”
Industry Minister Melanie Joly echoed Champagne’s call for Canadians to support local businesses, while vowing to work with new allies and trading partners.
“We cannot wait for Washington to decide our future,” she said.
The steep U.S. tariffs hit about $20 billion in Canadian goods – about 5.5% of its exports to the United States – after trade negotiations collapsed at the eleventh hour.
Under Canada’s planned response, US steel and aluminum products previously subject to a 24% duty will soon face 50% tariffs.
Goods facing 25% tariffs will include appliances, dairy products like cheese, as well as certain steel and aluminum derivative products.
A small category will see a 15% duty, including electric equipment and tools.
Overall, these form about 7.3% of Canada’s imports from the United States.
But analysts warn of tit-for-tat escalation.
Already on Monday, Trump pledged to double tariffs on Canadian autos starting next year, up to 50% from the current 25% for non-U.S. content.
Ontario Premier Doug Ford criticized Trump’s threat on autos, saying he could “kiss my ass” and threatening an electricity export surcharge.
Trump lashed out at Ford, warning of “far worse” consequences. He also referred to Carney as a “governor,” re-upping his inflammatory push for Canada to become the 51st U.S. state.
Highlighting the animosity, Trump said Tuesday he was considering renaming Lake Ontario as “Lake America,” as he did last year with the Gulf of Mexico, which he ordered to be called the “Gulf of America.”
Trump’s latest tariffs do not exempt products covered by the U.S.-Mexico-Canada free trade agreement (USMCA). They raise the U.S. effective tariff rate on Canadian exports to 6.9% from 5.1%, Oxford Economics estimates.
Tariffs on plastics, electrical machinery, and wood and paper products contribute most to the increase.
“Manufacturers in Quebec, New Brunswick, and Ontario will be affected the most,” Oxford Economics said.
Over the weekend, Carney said U.S. negotiators sought restrictions on Canadian trade deals with other countries at the last minute.
U.S. officials made unacceptable “threats” to the French language and “Quebec culture” too, he added, referring to eastern Canada’s French-speaking province.
Trump pushed back Tuesday, saying on Truth Social that he would “never interfere with Canadians speaking French” and accusing Carney of lying to “gain political support.”
The United States is Canada’s biggest trading partner, with Canadian exports to its neighbor representing 70% of its overall total.
Canada is the second biggest U.S. trading partner in goods this year, behind Mexico.
Polling released Sunday by the Angus Reid Institute showed Canadians broadly support Carney’s move to walk away from talks, but some fear economic repercussions.
The White House had alleged “discriminatory treatment” by Canada against U.S. alcohol, automobile and dairy products in rolling out new tariffs.
Trump delayed their implementation, but both sides failed to reach an agreement after hours of talks.
Beyond tariffs, Washington and Ottawa also have to agree on revisions to the USMCA, which Trump declined to renew in its current form.
Iran pledged Tuesday to retaliate against expanded U.S. sanctions intended to isolate its economy, expressing confidence that key trading partners would withstand pressure from Washington.
Almost six months into a conflict the U.S. has struggled to resolve, Treasury Secretary Scott Bessent unveiled the measures Monday but stopped short of the most punishing sanctions.
While he said countries that continued trading with Iran risked being forced out of the dollar-based financial system, he declined to give a timeline or identify which may be targeted, saying he would give them time to comply with the new directive.
“Why would I want to blow up the global financial system?” he said when asked why the measures had not gone further.
The Treasury Department did announce new sanctions on 60 individuals, entities and vessels, but the list did not feature any of the Chinese financial institutions suspected of facilitating Iran’s oil trade.
“We want to make clear here today that no one is above the reach of U.S. sanctions,” Bessent said in response to a question about Chinese banks.
China has been the biggest buyer of Iranian oil for several years, although the U.S. blockade of Iran’s ports has cut Iranian oil flows to China since Washington renewed it in mid-July.
Experts say Washington is wary of Chinese retaliation for any sanctions on its banks ahead of expected talks next month between President Donald Trump and Chinese President Xi Jinping, with any curbs on China’s exports of critical minerals especially sensitive.
China said Tuesday that its cooperation with Iran is conducted within the framework of international law and should not be interfered with or disrupted.
Oil prices fell for a second day as traders brushed off the impact of the sanctions, although market participants remained wary of Iran’s continued ability to disrupt shipping.
Oil tanker struck near Strait of Hormuz
An oil tanker was struck Tuesday by an unidentified projectile and disabled about 9 nautical miles (17 kilometers) northeast of Oman’s Ash Shishah, which lies at the entrance to the Strait of Hormuz, the United Kingdom Maritime Trade Operations said.
Before news of the latest sanctions, Iran threatened both a possible military response and further reduction in oil exports from the Gulf in retaliation for any U.S. economic measures.
After they were unveiled, Iranian Economy Minister Ali Madanizadeh said that Iran was prepared.
“Our defense is no longer so defensive; the enemies should wait for an attack,” he told state television. Neither China nor Russia had “accepted” the U.S. measures, he added, predicting that other countries would resist them.
Brig. Gen. Hossein Mohebbi, a spokesperson for Iran’s Islamic Revolutionary Guard Corps, vowed heavy blows to U.S. vital interests and energy chokepoints if Iran’s infrastructure is threatened, Press TV reported.
Iran and the United States signed an interim deal in June aimed at ending the war that began with U.S. and Israeli attacks on Iran in February, but it quickly faltered and Iran resumed attacks which have blocked most energy exports from the Gulf.
Mediator Pakistan made “significant progress” in the latest talks with Tehran that focused on preventing further escalation and the reopening of the Strait of Hormuz, the Pakistani military said Tuesday.
“We had a very constructive exchange,” Pakistani Interior Minister Mohsin Naqvi, who accompanied army chief Asim Munir to Tehran, said on the social media platform X.
An official at the Iranian president’s office, Mehdi Tabatabaei, said on X that Munir’s visit to Iran “yielded highly valuable diplomatic achievements, the results of which will soon be revealed.”
Little sign of diplomatic solution
Despite no major strikes by either side in weeks, there is little sign of a diplomatic solution.
Iran has spent decades under layers of U.S. and international sanctions that have battered its economy but have not deterred its leadership.
U.S. public approval of the war fell to its lowest level since the conflict’s early days, with Trump’s popularity at a record low ahead of congressional elections in November, a Reuters/Ipsos poll that closed Monday showed.
Oil transits through the Strait of Hormuz were at 5 million barrels per day Monday, provisional tracking from shiptracker Vortexa showed, down from more than 20 million per day before the war or about one of every five barrels consumed worldwide.
Thousands of people have died in the conflict, most of them in Iran and Lebanon, while much of Iran’s conventional military capacity has been degraded, its economy is struggling and then-Supreme Leader Ayatollah Ali Khamenei was killed.
But Iran is still able to attack Gulf neighbors and threaten oil tankers. The exact state of its nuclear program, which the U.S. and Israel aim to wipe out, remains unknown.
The price of corn surged to $5.2425 per bushel in global markets, hitting the highest level in about three years amid the El Nino weather phenomenon, dry conditions and rising geopolitical risks, including the Russia-Ukraine war.
Price movements in grains came to the fore due to El Nino, with sharp hikes in corn prices.
Corn previously reached $5.2450 on July 31, 2023.
Corn rose more than 11% compared with the end of July and increased more than 17% compared with the end of December 2025.
The bushel price of corn later stabilized at around $5.18.
Growing concerns over crop yields in the U.S. fuel expectations of tighter supplies and drive up corn prices, while rising U.S. corn exports contribute to the price increase.
Hot and dry weather in some corn-producing regions of the U.S., adverse weather in Europe and ongoing grain shipment disruptions in Ukraine fuel concerns over the global corn supply.
The corn harvest in the American Midwest came in lower than expected, while Russian and Ukrainian attacks on each other’s shipping routes halted grain exports.
While weather conditions threaten production, geopolitical disruptions pose risks to crop deliveries, and given the already high energy and fertilizer costs, the margin for offsetting additional supply shocks narrows.
Waning expectations of Federal Reserve (Fed) rate hikes and falling demand for the U.S. dollar also continue to drive up commodity prices.
Zafer Ergezen, a futures and commodities expert, told Anadolu Agency (AA) that El Nino’s effects began to be seen in June, especially in South America, Southeast Asia and Australia, and to a somewhat lesser extent in the U.S. and Europe.
“We’re seeing a serious impact of the weather phenomenon in West Africa,” he said. “There were concerns over a decline in corn yields, especially in Brazil, the U.S., and Southeast Asia.”
Ergezen stated that oil prices also contributed to the rise in corn prices as demand for corn used in biodiesel production climbs when oil prices rise, while around 60% of the corn produced across the globe is used for industrial purposes.
The combined effects of El Nino and high oil prices were instrumental in raising corn prices.
“El Nino will continue until the beginning of next year, and if oil remains at these levels, we may see even more upward movements in corn,” he said.
“As long as oil prices don’t decline and there isn’t a lasting peace deal between the U.S. and Iran, I don’t expect a deep pullback in corn prices,” he added.
Türkiye’s central bank reserves are projected to have increased last week to their highest level in five months, bringing the rebound since late June to nearly $40 billion, according to calculations.
The total reserves of the Central Bank of the Republic of Türkiye (CBRT) rose by an estimated $5.3 billion in the week ending Aug. 21, reaching $188.8 billion, calculations by Matriks Haber showed.
Total reserves stood at $183.5 billion in the previous week. The latest increase extends the recovery that began after reserves fell to a roughly six-month low in late June.
Reserves had dropped to $149.2 billion in the week ending June 26, before recovering to $164.4 billion by the end of July. The pace of the rebound accelerated in August, with reserves rising to $178.4 billion on Aug. 7 and $183.5 billion a week later.
The latest increase would bring total reserves to their highest level since the week ended March 13.
Rebound since June
The estimated figures show that reserves have increased by about $39.6 billion from their June 26 low.
The recovery has been particularly strong over the past four weeks, with reserves gaining about $10.4 billion between July 31 and Aug. 21.
CBRT total reserves had reached a record $218.2 billion in late January.
The figures for the last week are scheduled to be published Thursday.
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