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In early 2026, the global oil market suffered a sharp shock. Following American-Israeli airstrikes on Iran in late February, Brent prices surged to nearly $120 per barrel. In early March, Brent recorded its highest level since September 2023 — around $94, approximately 50% above the year-opening price.
For Ukraine, where fuel had already been rising in price throughout the previous year, this has a direct impact on logistics, business costs, and consumer prices — and the question is how deep and lasting that impact will be.
Why fuel drags everything with it
Oil is an input component in nearly every production process: transport, heating, raw material for the chemical and food industries, packaging. A rising oil price is like a wave passing through the entire economy.
And further oil price increases lead to higher fuel costs for consumers and affect all industries that use oil as an energy source or raw material — the result is a general price increase.
The chain looks like this: more expensive fuel → higher logistics costs → rising unit costs → prices on shelves. But there is also a second level — delayed effects: when businesses factor in anticipated price increases in advance, and workers demand higher wages to offset costs. This is how a moderate price impulse turns into sustained inflationary pressure.
Transport, fuel, and equipment respond to oil price changes the fastest and most sharply — in both oil-importing and oil-exporting countries.
What history shows
The fuel inflation mechanism has triggered several times over the past half-century, each time leaving a noticeable mark on the economy.
The 1973 oil crisis was the first systemic test. When OPEC restricted supply, the price per barrel quadrupled within a few months. Japan, which was then growing at 8% per year, contracted by 1.2% in 1974. Britain followed the same path: from 7.3% growth to a contraction of 1.7%. Inflation in several countries reached 9%, and central banks, having lowered rates to stimulate growth, only deepened the crisis — the result was stagflation that surprised even the economists who observed it in real time.
In 2008, oil took a different but no less instructive path. From $90 at the start of the year, it shot up to a record $147 in July — a gain of more than 50% in half a year. By December that same year, the price had collapsed below $40. Behind these figures lies a simple logic: expensive fuel cut consumer demand and increased production costs at a moment when the economy was already entering a recession. Nine out of ten postwar US recessions began shortly after a sharp spike in oil prices.
The 2021–2022 crisis added a new nuance to this picture. NBER researchers showed that the combination of oil shocks and loose monetary policy was the main driver of the inflationary surge of those years — and that central banks underestimated the speed at which a fuel shock spreads to the rest of the economy.
In all three cases, oil-energy-importing countries suffered the most acutely — and each of these precedents is directly relevant to where Ukraine finds itself today.
What research says
The link between oil and inflation has long been studied, but recent work has clarified several important details that are directly relevant to the current situation.
The impact of oil prices on inflation is asymmetric: rising oil prices lead to higher inflation across most sectors, while their decline has a significantly weaker effect in the opposite direction. Put simply, prices rise easily in step with oil but come back down slowly when oil gets cheaper. This means that every successive price spike leaves behind a certain inflationary residue.
The effect is stronger in oil-importing countries: when oil prices rise, production costs increase, which puts pressure on consumer prices and reduces the purchasing power of wages. For exporting countries the mechanism differs — there, higher oil revenues fuel domestic demand, which also leads to inflation but through a different route.
The time dimension deserves separate attention. The NBER study showed that the combination of oil shocks and loose monetary policy was the main driver of the 2021–2022 inflationary surge — and that the low elasticity of substitution between oil and labor amplifies the sensitivity of production costs to oil price fluctuations. In other words, when an economy is deeply integrated with oil at the level of production processes, even moderate price increases drive prices up faster than monetary regulators expect.
Inflation after a fuel shock arrives with a delay — but almost inevitably.
What is happening now
By the end of 2025, the global oil market looked relatively calm. The World Bank was forecasting a drop in Brent to $60 per barrel in 2026 — a five-year low driven by excess supply, slowing demand from China, and growing production outside OPEC+. It seemed that energy inflation was retreating.
Then came February 2026.
Following the start of the American-Israeli military operation against Iran, oil prices surged more than 30% in under a month, reaching $102 per barrel. The blockade of the Strait of Hormuz paralysed a significant share of global transit — through that strait alone, approximately 3.3 million barrels of petroleum products per day from the region pass annually.
The market reaction proved predictable. Goldman Sachs raised its Brent forecast to $105 per barrel in March and $115 in April, simultaneously raising its US inflation forecast and increasing its recession probability estimate to 30%. CaixaBank analysts noted that global inflation, which had already been running closer to 3% than the 2% target, received an additional push from the energy crisis.
Central banks found themselves in a difficult position: cutting rates amid a new inflationary wave is risky, while holding them means putting a brake on an already slowing economy. The EIA forecasts that Brent will remain above $95 for the next two months, before gradually declining to $70 by year-end — but only on the assumption of a relatively short conflict.
Ukraine: why the situation is more complex
A global fuel shock is always more painful for countries that depend on imported energy and have a smaller macroeconomic buffer. Ukraine meets both criteria — and to this is added the context of war, which amplifies each of the risks.
The war in the Middle East has already worsened Ukraine’s trade balance and increased energy costs. NBU Governor Andriy Pyshnyi warned of a possible acceleration of inflation against this backdrop. After eight months of gradual deceleration, Ukraine’s annual inflation accelerated to 7.6% in February 2026, while fuel and lubricant prices rose by 3.3% in just one month.
The structure of the Ukrainian economy makes it particularly sensitive to fuel fluctuations. Logistics remain expensive due to military route restrictions, businesses generate electricity independently because of damaged energy infrastructure, and fuel costs are built into the unit cost of goods and services with a higher weighting than in peacetime.
Oil-importing countries are the most vulnerable to rising prices: higher production costs put direct pressure on consumer prices, and the exchange rate of the national currency comes under additional pressure due to a growing import bill. For Ukraine, this means a double effect — both through unit costs and through the exchange rate component.
Dragon Capital analysts noted that the absence of an energy ceasefire remains the main factor constraining economic growth. In this context, the external fuel shock is layering on top of domestic energy vulnerability — and both processes are moving in the same direction.
Scenarios for Ukraine
The current situation is not unambiguously catastrophic, but it should not be underestimated either. How events unfold depends primarily on the duration of the Middle East conflict and on how quickly the global market finds equilibrium.
A short spike. If the conflict can be contained within a few weeks and transit through the Strait of Hormuz resumes, oil will return to the $70–80 range by year-end. This is precisely the scenario built into the EIA’s baseline forecast — on the assumption of a relatively short conflict. For Ukraine, this would mean a moderate acceleration of inflation within 8–9% annually, without a substantial revision of business plans and without sharp pressure on the exchange rate. Unpleasant, but manageable.
A prolonged new normal. If oil holds above $90–100 for several months, the economy will face systemic pressure. Logistics costs will rise across the entire supply chain, producers will factor in price increases, and real household incomes will fall. The NBU already forecasts inflation at 7.5% by the end of 2026 — and that was before the external fuel shock was fully reflected in prices. Under this scenario, the actual figure could significantly exceed the regulator’s forecast. This is the most likely outcome at the moment.
An energy shock. Escalation of the conflict, prolonged blockade of the Strait of Hormuz, or the involvement of other regional actors could keep oil above $110–120 for an extended period. Goldman Sachs has already raised its probability estimate of a US recession to 30% precisely because of this risk. For Ukraine, whose economy is already operating under constant stress, such a scenario would mean stagflationary pressure — a simultaneous slowdown in growth and acceleration of inflation. The resilience buffer for most enterprises is minimal.
What will become most expensive
The fuel shock is distributed unevenly across the economy. Some sectors will feel it almost immediately, others with a delay — but none will be left untouched.
Food. This is the most sensitive category for the Ukrainian consumer. Agricultural production depends on fuel at every stage — from tilling the field to delivery to the store. The link between oil prices and food prices is empirically established: oil is used in agriculture as fuel for machinery, for transporting inputs to farms and finished products to end consumers. In the conditions of war, where logistics routes are already extended and complicated, this effect is amplified further.
Logistics and delivery. The transport sector responds to fuel fluctuations the fastest and most directly. Transport is the largest consumer of oil, so any increase in its cost is immediately reflected in freight costs — and through them in the prices of all transported goods. For businesses, this means revising logistics contracts and finding ways to pass rising costs on to the buyer.
Construction. The industry depends on fuel at several levels simultaneously: machinery on sites, delivery of materials, production of cement and metal. In the context of active infrastructure restoration in Ukraine, more expensive construction means either higher estimated costs or a slowdown in the pace of work.
Services. It might seem that the service sector is less dependent on fuel, but this is a false impression. Courier delivery, taxis, cleaning, food service — all these businesses have a significant transport component in their costs. When that component rises, entrepreneurs either raise prices or squeeze margins to a critical level.
What businesses should do
Before drawing conclusions, it is worth noting the practical dimension — what an entrepreneur can take into account right now.
Reviewing logistics costs in financial models is the priority step. If the transport budget was drawn up on the assumption of stable or falling fuel prices, it needs adjustment. And it is worth building in not the current level, but a range with a margin — given that the situation in the Middle East remains unstable.
Fixed-price contracts over a long term carry elevated risk. If unit costs rise while the sale price is fixed, the margin shrinks automatically. It is worth reviewing the terms of such arrangements or building in a correction mechanism when the fuel component changes significantly.
Suppliers with long logistics chains become less predictable. Diversification or shortening of supply chains is not just a crisis measure but a structural improvement of business resilience.
Fuel as an indicator
The war in the Middle East has already affected Ukraine’s trade balance and increased energy costs — and this is only the beginning of the reflection of the external shock in domestic prices. Inflation, which had been decelerating for eight consecutive months, has started accelerating again. In February 2026, the annual figure stood at 7.6% — and the NBU forecasts it at 7.5% by year-end, although external fuel pressure is only partially built into that forecast.
Oil-importing countries are the most vulnerable to rising prices: higher production costs put direct pressure on consumer prices, and pressure on the national currency increases through a growing import bill. Ukraine falls squarely into this category — and with less of a resilience buffer than most of the countries compared in academic research.
The price at the pump is not a standalone statistic. It reflects the state of global markets, geopolitical tension, and the domestic vulnerability of the economy simultaneously. When all three factors are moving in the same direction, businesses that ignore this risk encountering problems that accumulated gradually but will hit all at once.
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